Shorting hedgies outpace the S&P 500 during July

GLOOMY sentiment among investors bolstered the return on hedge funds driven by short-selling strategies but hurt merger arbitrage managers last month, according to research released yesterday.

The strongest average returns in July were Commodity Trading Advisors (CTAs) – with a 2.70 per cent return – and short-sellers at 2.21 per cent, the EDHEC-Risk Institute reported.

The worst returns were from merger arbitrage funds, which suffered an average 0.46 per cent loss, with event driven hedgies typically dropping in value by 0.36 per cent.

The 1.01 per cent return on global hedge fund-of-fund strategies outpaced the Standard & Poor’s 500 index by more than three per cent.

Meanwhile it was revealed some major names in European hedge funds have suffered heavy losses.

Funds managed by Lansdowne Partners were among those hit. The Lansdowne UK Equity fund dropped 4.3 per cent in the month to 12 August, and is down 15.8 per cent this year. The Lansdowne European Equity fund is down 3.6 per cent this month to 12 August, and is down 9.4 per cent in the year.

The Lansdowne Global Financials fund is down 3.6 per cent in the month to 12 August, and down 12.5 per cent this year.

The Henderson European Absolute Return fund, managed by Stephen Peak, dropped 15.64 per cent in the month to 5 August, and is down 32.46 per cent this year to 5 August.

Both groups declined to comment.