Hedge fund managers protect capital in volatile markets

volatile_hedgeCaution on behalf of hedge fund managers in volatile markets led to flat and marginally negative returns in the first half of the year, but that saw them outperforming global markets.


As of the end of June this year, the Eurekahedge Hedge Fund Index stood at -0.02%. While in comparison, the MSCI World Index was down 3.56% in June.

Following sharp losses in May, hedge fund managers were more prudent in June and did well to protect capital as volatility in the market increased.

Although hedge fund returns for most regions were negative, managers outperformed their respective market indices. Latin American hedge funds delivered the best returns, gaining 0.95% during the month and outperforming the MSCI Latin America Index, which returned -1.11% with 26.3% volatility.

Latin American managers mostly profited from defensive positions in the equity sector to bring the Eurekahedge Latin American Hedge Fund Index to 1.47% June year-to-date. Broader emerging markets hedge funds were also marginally positive with gains of 0.15% while Asia ex-Japan funds returned 0.14% for the month.

Despite the somewhat difficult environment, launch activity in the hedge fund sector over the first half of the year was good with more than 500 launches seen globally. Ucits III hedge fund vehicles also maintained their popularity with assets under management topping US$100bn (€77.13bn) in the first six months of 2010.

According to the most recent Lipper Hedge Fund Outlook Report the outlook for the hedge fund community is due to improve.

The data provider said that the second half of the year poses a number of profitable opportunities for hedge fund managers considering that global stock markets ended the first half of the year on shaky ground.

In the report Lipper anticipated a sluggish recovery of the global economy and said that commodity investing will continue to offer interesting arbitrage opportunities to lock in profits for both macro and managed futures managers.

©2010 funds europe