Hedge Fund Index Lagged Equity Markets in July

Hedge fund performance in July lagged behind the equity markets in July, according to the Hennessee Group, an advisor to hedge fund investors.

The Hennessee Hedge Fund Index, a measure of more than 1,000 funds tracked by the firm gained 1.91% in July, while the S&P 500 rose 6.88%, the Dow Jones Industrial Average was up 7.08%, and the NASDAQ climbed 6.90%. The Barclays Aggregate Bond Index increased 1.07% in July.

So far this year, the Hennessee Hedge Fund Index has gained 1.86%, while the Dow is up 0.36%, and the Barclays Aggregate Bond Index has advanced 6.46% for the year. The NASDAQ is down 0.64% and the S&P 500 is down 1.21% this year. 

“Hedge fund managers lagged the broader markets due to defensive portfolio positioning,” Lee Hennessee, managing principal of the Hennessee Group, said in a press release Monday. “Managers began July with lower than average exposures after significantly reducing gross and net exposure levels during May and June. As a result, hedge funds lagged as equity markets rose sharply.”

The Hennessee Long/Short Equity Index rose 1.81% in July and is up 1.22% year to date. In July, U.S. equity markets their best month in a year, on better-than-expected corporate earnings. The sectors that led performance were materials, up 12.2%, industrials, up 10.3%, and energy with an 8.0% gain. The healthcare sector posted the lowest gains in July, up 1.3%, and the sector with the steepest loss this year, down 7.6%.

The Hennessee Arbitrage/Event Driven Index advanced 2.06% in July and has gained 4.51% this year. Arbitrage and event driven managers posted gains as volatility declined, liquidity improved, equity markets rallied and credit spreads tightened, Hennessee Group said.

The Hennessee Global/Macro Index gained 1.92% in July and has advanced 0.29% this year. After three months of losses, international equities reversed course in July and experienced a sharp rally as the MSCI EAFE Index advanced 9.41%, but still has lost 6.70% this year. Hedge funds lagged due to conservative portfolios.

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