The average Billion Dollar Club (BDC) hedge fund gained 0.1% in July but could not prevent the broader HFM Global Composite Index from slipping 0.1% off the back of underperformance among sub-BDC funds.
In what was a turbulent month for markets, few hedge funds added significantly to YTD gains in July, although most protected what had been for the industry a 13-year high half-year advance in H1. After seven months, hedge funds globally are averaging 9.0% gains for the year, with BDC funds up 7.2%. Markets were unsettled by the Covid-19 Delta variant, China’s crackdown on domestic tech companies and sharp moves in FX. But hedge fund allocations movement was positive, with net inflows of more than $18bn in July after June witnessed the biggest redemptions for nine months.
Event-driven setback: Event-driven funds running more than $1bn have been the top performers so far this year but had some of the biggest declines in July as the merger arb outlook declined. Most notably, the collapse of the Aon/Willis Towers Watson deal led to losses in the strategy, which was down 0.6% across all funds. However, $1bn+ event-driven funds are now up 12.1% after seven months of 2021 compared to 10.9% among event-driven hedge funds with less than $1bn. It encapsulated the mixed returns last month that many of the leading performers YTD posted declines in July.
Managed futures lead returns Middle of the pack so far in 2021, CTAs were the top industry performers last month, up 0.8% (7.9% YTD). Long equity positions and exposure to longer-date bonds boosted performance in the strategy, allowing CTAs to more than offset losses from FX volatility.