Hedge funds turned in better performance numbers for August than the major equity indexes did, and it's because they made the most of a general sell-off of risky assets on the broader equity and bond markets, according to a preliminary roundup by Morningstar.
The group also benefited from strategic moves among managed futures funds that took advantage of rising Treasury prices. The Morningstar 1000 Hedge Fund Index rose 0.1%, and the currency-hedged Morningstar MSCI Composite Hedge Fund Index rose 0.6%, while most global equity markets, especially those in the U.S., had declines. The report was released Wednesday.
But even in cases where hedge funds outperformed equities, the outcome was only relative. The Morningstar U.S. Equity Hedge Fund Index fell 2.4%, about half as much as the Standard & Poor's 500 for August. Funds that specialized in small-cap stocks dropped only 1.5%, versus the Russell 2000 Index's 7.4% dive. Managed futures funds that tracked price trends traded out of the Treasury market, giving the Morningstar Global Trend Hedge Fund Index a 3.5% gain in August.
