The Eurekahedge Hedge Fund Index gained 0.26% in June, underperforming the MSCI ACWI (Local) Index, up 1.93%. June's preliminary flow data indicates that the global hedge fund industry recorded $3.5 billion in performance-driven losses and saw $4.1 billion in net investor outflows.
NEW YORK, NEW YORK - MARCH 09: Stock trader Peter Tuchman works on the floor of the New York Stock ... [+]
Developed markets continue to open up
Vaccination rates in developed markets continue to increase, and as a result, officials are loosening travel restrictions. The sudden rebound in economic activity resulted in soaring inflation in some markets, especially the U.S., where the Consumer Price Index climbed 5.4% year over year. That marks the sharpest one-year spike in inflation since August 2008.
Some are now worried that the Federal Reserve will tighten its monetary policy earlier than expected due to the inflation spike. The central bank sees the inflation increase as transitory, although it has started to discuss the possibility of hiking interest rates. The median Federal Open Markets Committee participant looks for two rate hikes in 2023.
Rising stocks drive positive hedge fund returns
The S&P 500 and NASDAQ NDAQ ended the first half of the year at or near record highs with gains of 2.22% and 5.49%, respectively, in June. Equity benchmarks in Europe were mainly positive as the CAC 40 and DAX Index led the way with 0.94% and 1.13% gains, respectively.
For the first half of the year, hedge funds were up 8.09% after the most robust June year-to-date return since 2009. About 58% of fund managers reporting to the Eurekahedge Hedge Fund Index witnessed positive returns last month, while 30.6% have managed a double-digit return so far this year.
Final asset flows for May indicated performance-based gains of $17 billion for the hedge fund industry, paired with $32.4 billion in net investor inflows. For the first half of the year, hedge funds have recorded $84.7 billion in performance-driven gains and $52 billion in investor inflows. The global hedge fund industry had almost $2.4 trillion in assets under management as of the end of June.
Hedge fund performance by strategy
Performance across hedge fund strategies was mainly positive last month, led by distressed debt, multi-strategy and long/ short equity funds with returns of 1.93%, 0.73% and 0.72%, respectively. CTA/ managed futures, macro and event-driven funds were at the bottom of the barrel for June, with negative returns for all three strategies.
Event-driven hedge funds have outperformed the rest on a year-to-date basis with a 10.61% return, followed by distressed debt's 10.56% return and long/ short equity funds' 10.53% return. Arbitrage and fixed income were at the other end of the spectrum, although they remain in the green year to date at 3.26% and 3.78%.
