Hedge fund returns edge down in August

Last month, hedge funds dropped in value by a smaller percentage than large caps funds and the S&P 500 Total Return fund. Last month, hedge funds dropped in value by a smaller percentage than large caps funds and the S&P 500 Total Return fund.

Hedge funds fell an average of 0.23 percent in value in August, but provided a year-to-date return of 4.3 percent, according to a new report.

This finding comes from eVestment LLC in an update on hedge performance during the past year. The survey’s findings are based on eVestment’s global database of traditional and alternative strategies delivered through cloud-based solutions for investors.

The year-to-date performance of hedge funds, the report reveals, remains inferior to the 12-month return for the year-ago period (7.21 percent), the S&P 500 Total Return fund (15.98 percent) in 2012, as well as small cap funds (4.42 percent).

However, the report shows that hedge funds dropped in value by a smaller percentage than large caps funds (-0.57 percent) and the S&P 500 Total Return fund (-2.90 percent) in August. The performance of mid-size funds matched that of hedge funds for the month, while small cap funds edge down only slightly less (-.20 percent).

All but the S&P 500 Total Return fund, the report shows, fell in value for the most recent three-month period:

Fund type

Return

Hedge funds

-0.43%

S&P 500 Total Return

0.68%

Large funds (>$1B)

-0.99%

Mid-size funds ($250M-$1B)

-0.84%

Small funds (<$250M)

-0.31%

Hedge funds — portfolios of investments that use advanced strategies like leveraged long, short and derivative positions to achieve high rates of returns — are increasingly a component of private placement variable universal insurance and of variable annuities purchased by affluent investors. The funds are attractive because they generally don’t correlate in performance with stocks, bonds and mutual funds, and therefore offer opportunities to diversify portfolios and mitigate market risk.

Earlier this year, the products became a focus of the Financial Analysis (E) Working Group (FAWG) of the National Association of Insurance Commissioners, which is examining the increased interest among hedge fund managers and private equity firms in the life insurance industry.

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