Hedge funds with heavy China exposure were hit hard in July, reports Hedge Fund Research.
The HFRI China Index fell 7.7% in July, after the Shanghai Composite Index dropped 14% for the month. Capital investments in Asian hedge funds fell about $10 billion last month from its peak at $126.3 billion. The HFRI EM: Asia ex-Japan dipped 5.6%, and the HFRI Japan Index fell only 0.2%.
“Chinese financial markets have come under intense pressure, encompassing not only directional losses, but also liquidity, structural and political pressure, as Chinese equities have posted the sharpest declines since 2007,” said Kenneth J. Heinz, president of HFR, in a press release.
Before the July losses, Asian hedge funds were attracting big asset flows. In the second quarter, Asian funds had net asset inflows of $1.74 billion.
Overall, hedge funds lost about 0.28% in July, leaving them up 3.05% for the year, according to the Barclay Hedge Fund Index. Besides China, fears about a Grexit and a Puerto Rico default shook nearly every fund. Emerging Markets Index fell 3.59% on top of a 2.18% dip in June.
But 11 of the 18 Barclay hedge fund indices posted gains last month. Global Macro Index was up 3.52% after losses in June, European equities climbed 1.49%, and healthcare and biotechnology gained 1.11%.
“Marco funds benefitted from resurgent strength in the U.S. Dollar and continued weakness in commodities,” says Sol Waksman, founder of BarclayHedge.
Photo: T Chu