Hedge fund returns for the first half of 2010 were uninspiring, hovering between flat and slightly negative for the major hedge fund indexes.
But the returns were vastly better than the -6.64% of the S&P 500 and -9.1% of the MSCI World index for the period.
Leading the pack for the six months ended June 30 was the 0.4% return of the HFN Hedge Fund Aggregate index, followed by the Hennessee Hedge Fund index, 0.2%; Greenwich Global Hedge Fund index, 0.1%; Lyxor Hedge Fund index, 0.09%; HFRI Fund Weighted Composite index, -0.18%; and Eurekahedge Hedge Fund index, -0.2%.
“(Equity) hedge funds continued to decline … amid a broad-based reduction of risk and significant volatility. Hedge fund risk management performed well, with hedge funds declining only one-fourth (as much as) traditional benchmarks,” Lee Hennessee, managing principal of Hennessee Group, said in a news release on the firm's hedge fund index returns.
By contrast, the 5.33% year-to-date June 30 return of the Barclays Aggregate Bond index outperformed all general hedge fund indexes. Also, the strong bond market of the first half of the year buoyed returns of strategy-specific fixed-income hedge fund indexes.
The Hennessee Fixed Income hedge fund index, for example, returned 5.69% for the first six months of 2010 and the Hennessee High Yield hedge fund index was up 4.42%.
The Eurekahedge Distressed Debt Hedge Fund index was up 6.42%, and the Eurekahedge Fixed Income Hedge Fund index return was up 3.73% in the first half.
Returns of hedge funds of funds trended much lower than those of single and multistrategy hedge funds in the first two quarters, with the Eurekahedge Fund of Funds index returning -1.11% and the HFRI Fund of Funds Composite index, -1.39%, for the six-month period.