Hedge funds take a hit

Continuing overseas market volatility has driven hedge funds into negative returns again, with the overall sector posting minus 0.02 per cent for the current year, according to the Eurekahedge hedge fund index report.

All three main indices have been forced into negative territory, with Islamic hedge funds, fund of funds and long only absolute return funds posting year to date returns of minus 1.13 per cent, minus 1.11 per cent and minus 0.79 per cent respectively.

The sector returns dropped to negative 0.5 per cent in June, with seven out of nine strategy indices recording negative losses for the month. The long short equities hedge fund index was the most affected, losing negative 1.12 per cent for the month, and slipping into overall negative returns for 2010 of minus 1.75 per cent. Arbitrage, event driven, macro and relative value hedge funds also posted negative returns for the month.

While the majority of regional hedge funds posted positive returns for the year to date, four out of seven indices recorded negative returns for June, with Eastern Europe and the Japan hedge funds suffering the most at minus 2.29 per cent and minus 2.13 per cent respectively. Asia ex Japan hedge funds posted year to date returns of minus 3.13 per cent, while emerging markets hedge funds sat at negative 0.65 per cent.

Hedge funds experienced sharp losses in May, with a "very volatile market environment" continuing through the month of June, marked by sharp trend reversals and erratic price movements, the report stated.