Hedge fund returns ended the first half of the year positively, with the HFRI Fund Weighted Composite index returning 2.4% in the six months ended June 30.
The index’s six-month return, calculated by Hedge Fund Research, topped the 1.2% return of the S&P 500 index and the -0.1% return of the Barclays U.S. Aggregate Bond index, but trailed the MSCI World ex-U.S. index return of 4.8% as well as the 3.1% return of the MSCI Emerging Markets index.
On a quarterly basis, the HFRI Fund Weighted Composite index returned 2.1% in the three months ended March 31 and 0.2% in the three-month period ended June 30.
The 2.5% return of the HFRI Fund of Funds Composite index for the six months ended June 30 topped the aggregate return of multi- and single-strategy hedge funds in HFR’s database. The hedge funds-of-funds index returned 2.5% in the first quarter and 0.1% in the second quarter.
The second quarter was much rougher for hedge fund managers, said Kenneth J. Heinz, HFR’s president, in the firm’s second quarter-end report.
“Increased financial market volatility and reversals of many of the performance trends from the first half of 2015 resulted in declines across many areas of hedge fund performance to conclude June with an increased focus on hedge fund … positioning in Chinese and Greek/European equities, oil and the euro currency,” Mr. Heinz said.
The coming investment environment might continue to favor equity, event-driven and arbitrage strategies, Mr. Heinz said, noting that HFR indexes tracking these strategies outperformed U.S. equities in the six months ended June 30: HFRI Equity Hedge (total) index, 4.05%; HFRI Event-Driven (total) index, 3.1%; and HFRI Merger Arbitrage index, 3.3%.
This outperformance highlighted “an important performance inflection point,” Mr. Heinz said, stressing that “as recent macroeconomic uncertainty develops … in coming months, hedge fund investors are likely to continue to benefit from sophisticated, non-directional and low-beta exposures to many powerful, complex and diverse trends.”