June was a spectacular month compared to May. Global markets continued to recover and the best performance came from funds of funds focusing on emerging markets and European single manager funds. The primary sources of gain in these markets were equity long/short funds, followed closely by multi-strategy funds.
June was good for European markets. The MSCI local currency index rose 3.24%, a new three-year high. Oil and gas stocks were also star performers, rising 9%. Corporate activities and bid speculations remained high as interest rates continued to decline. The strengthening of the US dollar (up 2.02%) against the euro caused an increase in inflows into European equities. Bond yields in the US and Europe remained low before bouncing back in response to higher-than-expected ISM figures, up 2.4% at 53.8. Oil prices touched $60/bl (e48.6/bl).
Against this positive backdrop, the Eurekahedge All Strategies Fund of Funds European Index rose 1.88% – the second best performance for June after emerging market funds.
US equities and bonds were
flat as volatility was low. The MSCI North America Equity Index returned a mere 0.4%
for the month. US investing hedge funds rallied, posting
a gain of 1.47%. Small cap
stocks were in. The Eurekahedge North American Equity Long/Short Fund of Funds Index registered a positive 1.89% in June, double May’s figure.
The spread between short-term interest rates and longer term five- and 10-year treasury yields continued to narrow throughout the year, falling by another 20bp in June. The US dollar went higher against the euro, Swiss franc and the Japanese yen. Volatility and corporate leverage levels both remain low. M&A activities picked up steam during the month. Distressed debt and multi-strategy funds of funds rose 1.1% in (-0.04% in May) and 1.17% (0.36% in May).
Asia Japan All Strategies Fund of Funds Index rose sharply in June to post a healthy return of 1.38% as compared to a negative 0.08% in May 05. The surge came on the back of gains from Asian equity long/short and multi-strategy funds, both of which returned to positive territory in June.
Shashi Agarwala is with Eurekahedge in Singapore.