The Eurekahedge Hedge Fund Index was up 0.15% in June 2021, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 1.93% over the same period.
Covid-related mobility restrictions in most developed markets continued to be progressively relaxed, providing support to the reopening of their economies.
The quick rebound in economic activity led to increased inflation in some countries, most evidently in the United States where in May, the US consumer price index increased by 5.0% year-on-year which is the highest level since August 2008.
This has led to fears that the higher inflation figure could compel the Federal Reserve to tighten monetary policy earlier than expected. Although the Federal Reserve considers the rise in inflation to be transitory, they have started to discuss the possibility of rate hikes with the median FOMC participant expecting two rate hikes in 2023.
The S&P 500 and NASDAQ closed the first half of 2021 at or near record highs, rising by 2.22% and 5.49% in June respectively, supported by the rebound in economic activity as more people return to work. Over in Europe, returns were mostly positive among equity benchmarks in the region with the CAC 40 and DAX index taking the lead with gains of 0.94% and 0.71% respectively.
The increased pace of vaccination in Europe has led to increased optimism for a more sustained reopening of economic activity in the second half of the year. Returns were mostly positive across geographic mandates in June with Asia ex-Japan and emerging market hedge funds in the lead with returns of 2.04% and 1.20% respectively.
Across strategies, distressed debt and arbitrage outperformed their strategic peers with returns of 4.30% and 0.70% respectively throughout the month.