While the performance of funds of funds for August has been in keeping with the previous three months’ very positive and rising returns, the slope of the rise has taken a turn towards the shallow. The Eurekahedge Global Fund of Funds Index returned 0.8% in August (as compared with +1.6% in July) and is tentatively up 1.5% in September .
The markets have not yet fully evaluated and absorbed the impact of hurricane Katrina, the key event of the month. The hurricane exacerbated the rise in energy prices (up by about $10 per barrel from $61 at the start
of the month, breaching the $70 mark). This was also rough on the Asia-Pacific markets, especially on economies that had a significant portion of their budgets going into fuel subsidies.
This pattern shows in a strategy-wise breakdown of the returns as well. Our Fund of Funds indices across almost all strategies returned under 1% for the month, the exceptions being equity long/short and multi-strategy funds of funds allocating to hedge funds investing in emerging markets and in Europe. These two strategies have also been the top revenue generators for funds of funds across all regions, in July. The All Regions Equity Long/Short Fund of Funds index rose 1% while its European and emerging markets counterparts rose 2.2% and 1.5% respectively, during the same period.
Funds allocating to CTA hedge funds were the next best performers of the month after those allocating to equity long/short funds. The former were the worst performers across all regions in July (partly owing to being caught off-guard by the soaring oil prices in the last week of July). The Eurekahedge CTA Fund of Funds Index bounced back from negative returns (-0.1%) in July and rose 0.9% during the month, with managers being more prepared in taking advantage of energy price movements.
Looking at August returns by region, the corresponding Eurekahedge All Strategies fund of funds indices returned 1.9% in the emerging markets, 1.4% in Europe, 0.9% in Asia & Japan, and 0.5% in the US.
Rajeev Baddepudi is hedge fund analyst with Eurekahedge based in Singapore

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