The Eurekahedge Hedge Fund Index was down 0.27%1 in July, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 0.40% over the same period. The steady progress of the COVID-19 vaccine rollout in several major developed markets enabled the relaxation of mobility restrictions which provided support to the global economic recovery. However, investor sentiment was dampened by the spread of the highly infectious Delta variant of COVID-19, leading to concerns that the economic momentum would not be sustainable. The Federal Reserve noted that the US economic recovery remains on track but said that tapering would only be considered after substantial improvements to the economy and the labour market has been achieved. Over in China, the Chinese authorities imposed a crackdown on technology and education companies which unsettled investors and led to a sharp decline in Chinese equities in July – the CSI 300 Index and Hang Seng Index posted returns of -7.90% and -9.94% respectively. Nevertheless, strong corporate earnings in the United States have enabled US equities to perform well in July with the S&P 500 and DJIA gaining 2.27% and 1.25% respectively. Over in Europe, returns were mostly positive among equity benchmarks in the region with the CAC 40 and Euro Stoxx 50 taking the lead with gains of 1.61% and 0.62% respectively. The increasing share of people fully vaccinated against COVID-19 boosted hopes that lockdowns would not be necessary despite the rising cases of the Delta variant. Returns were mostly negative across geographic mandates in July with European hedge funds in the lead with a return of 0.61% while North American and Asia ex-Japan hedge funds posted returns of -0.23% and -1.18% respectively. Across strategies, distressed debt and CTA/Managed Futures hedge funds outperformed their strategic peers with returns of 1.04% and 0.45% respectively throughout the month.
Roughly 51.7% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in July, and 35.3% of the hedge fund managers in the database were able to maintain a double digit return in 2021
Figure 2 illustrates the 2021 performance of hedge fund managers across regions. As of July year-to-date, all of the geographic mandates have recorded positive returns. Global hedge funds registered their best July year-to-date return since 2009 as they returned 7.85%, supported by the US$1.9 trillion economic stimulus package rolled out by the Biden administration as well as the continued speedy rollout of COVID-19 vaccinations. North American hedge funds outperformed their regional peers with their 11.01% return, followed by European hedge funds which returned 6.66%. At the other end of the spectrum, Latin American hedge funds lagged the group with a return of 1.07%.
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