Hedge funds posted a narrow loss in July – the first decline since September last year – ending a nine-month streak of consecutive gains.
Data from Hedge Fund Research (HFR) shows that the HFRI Fund Weighted Composite Index fell by 0.6% in July against a backdrop of market volatility.
The performance dispersion of the underlying index constituents narrowed in July, as the top decile of the HFRI gained an average of 4.8%, while the bottom decile declined an average of 7.1% for the month.
Kenneth Heinz, president of HFR, said: “Hedge funds navigated a volatile market environment in July with mixed performance across sub-strategies and narrow declines across broad-based indices as, despite strong corporate earnings, investors focused on increased uncertainty surrounding renewed focus on the spread of virus variants.”
However, Heinz added that the evolving macroeconomic environment continues to be fluid with reflationary and expansionary trends subject to sharp reversals and falling rates and inflation expectations.
“Hedge funds remain tactically positioned for these shifts, with high realised equity market volatility, oscillating between record highs and sharp correction cycles within intra-month, or even shorter, market cycles,” he said.
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