Morningstar Reports Hedge Fund Performance for July, Asset Flows Through June
CHICAGO — Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today reported preliminary hedge fund performance for July 2011 as well as asset flows through June. The Morningstar MSCI Composite Hedge Fund Index, an asset-weighted composite of nearly 1,000 hedge funds in the Morningstar hedge fund database, rose 1.1% in July, outpacing the SandP 500’s 2.0% decline for the month.
“Global equity markets struggled in July as the United States approached the debt ceiling deadline and as concerns regarding the European debt crisis deepened,” said Terry Tian, alternative investment analyst for Morningstar. “Yet many hedge fund strategies delivered positive returns for the month.”
Trend-following strategies posted the largest gains in July, as gold prices advanced to new highs and U.S. Treasuries continued to rally. The Morningstar MSCI Directional Trading Hedge Fund Index, which tracks funds betting on momentum in currency, commodity, equity, and bond markets, climbed 2.5% this month, much more than other hedge fund indexes.
Funds with a broader geographic focus also delivered strong results in July. Outperformance in Asian-pacific stock markets in particular helped to bolster the Morningstar MSCI Global Markets Hedge Fund Index, which increased 1.6%. Multi-strategy funds provided welcomed downside protection as well in July. The Morningstar MSCI Multi-Process Group Hedge Fund Index rose 0.5%.
European-equity focused hedge funds produced some of the worst results in July. The Morningstar MSCI Europe Hedge Fund Index slipped 0.8%, more than most other hedge fund indexes. These hedged strategies still managed to outperform the MSCI Europe Stock Index, which declined 3.4% amid mounting pressure from sovereign debt woes and riots in Greece.
Arbitrage strategies fell flat this month, with the Morningstar MSCI Relative Value Hedge Fund Index eking out a small increase of 0.1%. Following seven straight months of modest gains, the Morningstar MSCI Merger Arbitrage Hedge Fund Index fell 0.1% in July, as merger deal spreads (or profits) remained tight.
Funds in Morningstar’s diversified arbitrage and U.S. long/short equity hedge fund categories netted the largest inflows in June, more than $300 million each. The largest outflows came from the equity market neutral and multistrategy hedge fund categories, which leaked approximately $143 million each. Overall, single-manager funds in Morningstar’s database experienced inflows of $645 million in June, a significant drop from previous months. Hedge fund of funds in Morningstar’s database experienced outflows of $124 million in June.
July returns for the Morningstar MSCI Hedge Fund Indexes are based on funds that reported as of August 11, 2011. June asset flows are based on funds that reported as of August 12, 2011. Hedge fund investors, managers, consultants, and advisors can access additional information through the Morningstar® Alternative Investment CenterSM, formerly Morningstar® AltvestSM, the company’s research platform designed specifically for hedge funds, or Morningstar DirectSM, the company’s global research platform for institutions.
Morningstar has approximately 11,000 hedge funds and funds of hedge funds in its database. Morningstar calculates hedge fund indexes by applying the MSCI Hedge Fund Index Methodology and Hedge Fund Classification Standard to Morningstar’s hedge fund database. These indexes demonstrate the performance of hedge funds to investors who have hedged their currency exposure back into U.S. dollars. The MSCI Hedge Fund Index Methodology classifies hedge funds by investment process, geography, and asset class.
This release is not intended to be an offer or solicitation for the sale of hedge funds. The information is not warranted to be accurate, complete, or timely. When considering hedge funds, investors should consider various risks, including the fact that some products engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager. The high degree of leverage that is often obtainable in trading can lead to large losses as well as gains. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 400,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 5 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment management subsidiaries and has more than $180 billion in assets under advisement and management as of June 30, 2011. The company has operations in 26 countries.
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