Hedge fund returns were flat to marginally negative in June (-0.50%1) as most managers steered cautiously through volatile markets. The June year-to-date returns of the Eurekahedge Hedge Fund Index now stand at -0.02%. In comparison, the MSCI World Index was down 3.56% in June, with the year-to-date measure falling to -10.88%.

Highlights for the month include:

• Hedge funds remained flat June year-to-date (-0.02%) while outperforming global markets by nearly 11%.
  
• Strong launch activity was seen in 1H2010 – more than 500 launches globally.
  
• UCITS III hedge fund assets crossed US$100 billion during 1H2010.
  

After experiencing sharp losses in May, hedge fund managers did well to protect capital in June, which witnessed a very volatile market environment. The month was marked by sharp trend reversals and erratic price movements across most asset classes as the VIX registered an increase of 8%. Although hedge fund returns for most regions were negative, managers characteristically outperformed their respective market indices.

Latin American hedge funds delivered the best returns, gaining 0.95% during the month and outperforming the MSCI Latin America Index, which returned -1.11% with 26.3% volatility. Latin American managers mostly profited from defensive positions in the equity sector to bring the Eurekahedge Latin American Hedge Fund Index to 1.47% June year-to-date. Broader emerging markets hedge funds were also marginally positive with gains of 0.15% while Asia ex-Japan funds returned 0.14% for the month.

Most hedge fund strategy indices ended the month in negative territory, with long/short equity managers suffering the most losses. The Eurekahedge Long/Short Equity Hedge Fund Index was down 1.12% in June as global equity markets remained on the edge throughout the month. Most other strategies were marginally in the red, while fixed income continued to deliver solid gains on the back of rallying bond prices.

CTA/managed futures funds were positive for the month, gaining 0.55% as most managers successfully navigated through the range-bound but choppy markets. Managers employing volatility arbitrage and dispersion strategies were also up during the month, gaining 0.51% on average.