July ’14 Hedge Fund Recap - PDF ATTACHED
SPECIAL SECTION:
There have been a number of questions around the Event Driven space given last week’s activity. Event Driven gross was at multi-year highs as of early August; despite last week’s news, gross and net leverage saw relatively small declines. Among Multi-Strat / Macro funds, we have recently seen net leverage fall across this sample (though these figures are generally more volatile).
PERFORMANCE:
Most hedge funds gave back some ground in July as over 60% of funds had negative returns and the median fund fell 58bps. This leaves overall YTD returns slightly above +1%, which puts it in line with July YTD returns in ’10 and ’11
Stock picking appeared to be challenging again last month: global equity long positions fell nearly 3%, which was almost 2% more than the MSCI AC World and 1% more than shorts
LEVERAGE:
In July, Asia saw increases in gross and net leverage, while Europe saw decreases in both. In the early part of August, Europe gross and net have continued to fall, whereas in Asia, the increases seen in July have reversed some. US Equity L/S leverage figures were relatively non-volatile MoM.
EQUITY TRADING ACTIVITY:
Despite US and European equity markets pulling back in July, hedge funds remained modest buyers of DM equities during the month.
Despite the deal-related news in early Aug, Event Driven funds only exhibited one large day of net selling (Aug 6) and this only served to offset a small fraction of the net buying in Jul.
US SECTOR ACTIVITY:
7 of 10 sectors were net bought in July.
Health Care was the most net bought sector in July (4th consecutive month where it has been one of the most net bought sectors); in contrast, Discretionary was the most net sold sector – this sector has been net sold in 11 of the last 14 months
CAP INTRO UPDATE:
Investors seem somewhat disappointed by muted Equity L/S performance YTD. In the UK, Event Driven strategies remain popular and UCITS allocators continue their Macro search. In Asia, a number of notable new funds recently launched or will over the next several months.