The HFRI Fund Weighted Composite index returned 4% in the second quarter, trailing the 5.8% return of the index in the first quarter, according to data by Hedge Fund Research.
The second quarter return also lagged the 9.2% return the index recorded in the quarter ended June 30, 2020.
The return of the HFRI Fund Weighted Composite index year-to-date June 30 was 10%, the best first half-calendar year return since 1999's 13.5% return, and well above the 3.5% decline in the index's performance in the six months ended June 30, 2020.
Hedge fund performance in the first half was "driven by optimism regarding the U.S. economic reopening and despite increasing signs of building inflationary pressures in the U.S. and Europe," HFR researchers said in a report accompanying the performance release.
Among HFR's hedge fund strategy indexes, the HFRI Equity Hedge (Total) index led performance with 5.5% return for the three months ended June 30 "as many equity markets reached record highs," HFR researchers noted in the report. In the first quarter, the equity hedge fund index was up 6.8%.
HFR's other hedge fund strategy indexes each produced positive returns in the second quarter that were lower than their performance in the prior quarter.
The HFRI Event-Driven (Total) index returned 3.7% in the quarter ended June 30 vs. 7.5% in the previous quarter. The HFRI Macro (Total) index was up 3.6% in the second quarter compared to 4.2% in the three-months ended March 31, while the HFRI Relative Value (Total) index returned 1.8% in the second quarter and 3.7% in the first quarter.
"Hedge fund managers and investors are positioning for a dynamic performance environment which may shift rapidly as a function of political developments, new information on virus mutation and vaccine efficacy, as well as demand shifts to consumer, technology and energy trends," HFR president Kenneth J. Heinz said in the report.
He added that hedge fund managers that are tactically and opportunistically positioned and can "preserve capital through the volatility are likely to attract institutional investor capital and lead industry growth (in the second half of 2021)."