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Hedge funds were up for the second month running as managers outperformed the underlying markets in August. The Eurekahedge Hedge Fund Index was up 0.71%1 during the month, bringing the year-to-date August returns to 1.92%. The MSCI World Index, on the other hand, was down 3.69%, with its year-to-date August figure falling to -7.51%.

Below are the key takeaways for the month:

* Hedge funds outperformed global markets by 7.5% August YTD.

* Assets in UCITS III hedge funds crossed US$130 billion.

* CTA/managed futures funds delivered 3.00% in August.

* Distressed debt hedge funds were up 8.56% August YTD.

* Japan is the best performing hedge fund region versus the underlying markets – the Eurekahedge Japan Hedge Fund Index was ahead of the Nikkei 225 by 16.8% August YTD.

In terms of regional mandates, hedge funds in the American time zone were the best performing, with Latin American managers posting gains of 0.60% and North American managers delivering profits of 0.37%. North American managers delivered significant outperformance to underlying equity markets through their exposure to safe assets such as gold and the US dollar – both of which were up during the month. Other US commodities also witnessed rallies, helping North American CTA managers to post excellent returns of 2.24%, the best among the regional managers. As of August year-to-date, the Eurekahedge North American Hedge Fund Index advanced 2.62% while the S&P 500 is down 5.9%.

On the flip side, Japanese managers suffered the greatest losses in August as the Eurekahedge Japan Hedge Fund Index lost 1.03%. The Nikkei 225 was down 7.5% in the month, breaking below 9,000 points, which had been a support level for over a year. The strong Japanese yen, trading at a 15-year high against the US dollar, also translated into declines in the underlying markets. European hedge funds were also in the red as the Eurekahedge Europe Hedge Fund Index lost 0.26% in the month.

In terms of strategic mandates, CTA/managed futures hedge funds delivered the best performance in August as a spike in risk aversion during the month sent money into safety assets and benefited managers who were long on gold and the US dollar. Rallies in soft commodities were also profitable for CTA managers – the Eurekahedge CTA/Managed Futures Hedge Fund Index was up 3.00% in August. Fixed income strategies also ended the month in positive territory amid a flight of capital to the safety of bonds. Long/short equity managers, however, suffered marginal losses to the tune of -0.46% amid negative movements in most equity markets across the globe.Source
KM