July has marked one of the best performances on record for the hedge fund industry. The HFRI Fund Weighted Composite Index’s 3.24% return last month was its second-best monthly performance since January 2019 and third best since September 2010.
The index, which is an investable barometer of the hedge fund industry, saw major losses during the first quarter’s coronavirus sell-off. However, since then, the index has gained for four consecutive months and almost returned to positive territory at -0.27% return for the year to date.
Kenneth Heinz, president of hedge fund data and indices provider HFRI, said hedge funds surged across a wide range of strategies in July with strong performances in technology, shareholder activist, CTAs and volatility, as well as blockchain/cryptocurrency, risk parity, risk premia and liquid alternative products.
“Institutional investors are actively looking to increase exposure to hedge funds and alternative strategies in H2 2020 as a direct and ongoing result of the intense and extreme volatility from H1 2020, including both realised and implied volatility, and positive and negative market cycles,” Heinz said.
He added, “Positive performance for 2020 has contributed to an environment of and expectations for strong industry-wide growth into 2021.”
Eurekahedge, another hedge fund data provider, reported its main Eurekahedge Hedge Fund Index was up 2.61% in July, bringing its year-to-date return to 1.73%, supported by the robust performance of underlying global equity markets.
Funds focussed on Asia, excluding Japan, were up 4.52% and outperformed North American and European funds, which returned 2.45% and 2.32% respectively.
This largely reflected the strong performance of Chinese stock markets. The Shenzhen Composite and CSI 300 rose 14.24% and 12.20%, respectively, throughout July.
The tech-heavy NASDAQ meanwhile was up 8.82%, pushing its year-to-date return to 19.76%, and the S&P 500 returned 6.53% throughout the month, bringing its 2020 performance back into positive territory.
About 79.1% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in July, and 20.2% of the hedge fund managers in the database were able to maintain double-digit returns over the first seven months of 2020.
Cayman fund registrations bounce back
The number of registered funds in the Cayman Islands has declined slightly since the beginning of the year.
A total of 10,709 funds in June represents a 1.36% drop compared to the end of 2019 but also a bounce back from the 10,505 registered funds at the end of first-quarter 2020.
The new Private Funds Law has so far added about 11,200 private funds under the purview of the Cayman Islands Monetary Authority.