Hedge funds started making money again in July, with the Morningstar 1000 Hedge Fund Index up 2.7% over the previous month.

The index rose 0.35% year to date, according to the Chicago company.

Signs of a global recovery helped goose hedge-fund performance, but many hedge-fund managers missed the boat. A market rally took the MSCI Europe NR Stock Index up 11.6% in July, while Morningstar’s Europe Hedge Fund Index rose only 5.6%. According to Nadia Papagiannis, alternative investments strategist at Morningstar, this was more a case of hedge fund managers not trusting the rally and shoring up against a dip that didn’t happen, in July at least.

The rebound in both the equity markets, especially in  Europe, and a bump in investor sentiment had a positive knock-on effect on hedge funds driven by corporate events, which sent the Morningstar Corporate Actions Hedge Fund up 3.2% in July. Largely positive bank stress tests in Europe, higher-than-expected corporate earnings reports and fewer credit defaults narrowed spreads, too, which helped debt-linked hedge funds. The Morningstar Debt Arbitrage Hedge Fund rose 3.1% over the same period.

Oddly, none of this good news seemed to translate into positive results for composites of hedge funds. Morningstar’s hedge fund database experienced asset outflows of $1.6 billion in June, and the Morningstar Hedge Fund of Funds Index remained in the red year-to-date with returns of -1.9%, even though at 3.3%, its performance in July alone outperformed Morningstar’s 1000 HF Index.


Register or login for access to this item and much more

All Bank Investment Consultant content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access