June a Down Month for Hedge Funds, but Funds Still Outperform Key Indexes

The hedge fund industry produced an aggregate return of -0.93% in June, according to eVestment’s just-released June and 2Q 2015 Hedge Fund Performance Report. While a down month, June’s performance was just over 100 basis points ahead of the S&P 500, which fell -1.94% during the month. The industry’s Q2 2015 return of +0.65% also outperformed the S&P (+0.28%) and a balanced index of 60% MSCI World/40% Citi WGBI (-0.42%).

June’s report features an expanded look at Asian, Middle East and other regional hedge fund trends as the hedge fund industry and investor base becomes increasingly global. A few interesting points from this expanded coverage, according to report author Peter Laurelli, eVestment vice president and head of research, include:

· Despite nearly 5% declines from funds focused on both China and Russia in June, emerging market hedge funds were a highlight for the industry in Q2 and H1 with returns of +3.72% and +4.18%, respectively.

· Hedge funds focused on Chinese markets outperformed indexed exposure to the country in Q2 and H1. Average hedge fund returns of +12.91% and +20.46% beat the S&P China BMI which rose +8.96% and +15.46% in Q2 and H1 2015, respectively.

· Firms domiciled within Asia have outperformed all other major domiciles in 2015, driven primarily by exposure to Chinese markets. Firms located in China and Hong Kong have performed best while those domiciled in Japan have lagged.

· Firms domiciled in the Middle East have performed well in 2015, +6.14%. Despite its small relative size, the universe of Middle East domiciled firms is comprised of a diverse mix of strategies including dedicated EM, global LS and market neutral equity, FX and credit.

Going forward, the report will highlight key hedge fund trends from various global markets, in addition to overall hedge fund industry trends.

Among major global hedge fund segments, a few key points from this month’s report include:

· Activist strategy returns have experienced volatility amid equity market swings and ended Q2 with a -0.99% loss in June. The decline was not enough to bring average activist hedge fund performance negative in either Q2 or H1 2015, +0.96% and +2.32%, respectively.

· Commodity strategies rebounded in June led by large positive movements in agriculture and natural gas prices. Commodity funds returned +1.45% in June. Gains were enough to lift Q2 into positive territory, +1.42%, but H1 2015 returns remain down for the year, -0.98%.

· June proved another difficult month for managed futures hedge funds. The strategy declined an additional -2.64% during the month, the universe’s third consecutive monthly decline. Losses dropped the average Q2 return to -3.99% and dragged returns for the first six months of 2015 into negative territory, -1.11%.

To download a full copy of the report, please click here https://www.evestment.com/resources/research-reports/2015-research-reports/hedge-fund-industry-report---june-2015