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9 Aug 2007

Hedge Funds July Performance

According to a report from Chicago-based Hedge Fund Research Inc., hedge funds globally returned 0.49% in July. The gain, based on a sample of managers among the 6,500 surveyed, brought the average 2007 advance to 8%.

Macro-fund managers, who wager on trends in stocks, bonds and currencies worldwide, trailed peers in July with a 0.34% increase, bringing their returns to 5.9% on the year.

Early estimates from the HFN Hedge Fund Aggregate Average show +0.29% in July, the increase was the 2nd positive month in a row for hedge funds when the S&P 500 has been negative and 12th positive month in a row overall. Through the first seven months of 2007 the Aggregate is +7.65%, considerably outperforming the S&P 500 Total Return which ended June -3.10% and +6.01% YTD.

The influence of the difficulties facing subprime borrowers and lenders over the last few months began to be felt across most credit markets in July and filtered into equity markets near month's end. While there have been some high profile fund meltdowns in July, the reality of the hedge fund world is that despite their visibility, these funds under extreme stress represent a small percentage of a vast and diverse industry.

Whether when the dust settles the aggregate of all hedge funds is slightly positive or negative, the focus should be on the continuing significant outperformance of the group from broad equity markets. While results are still coming in, it appears performance in July was driven by funds with exposure to emerging markets and those able to take advantage of strong interest rate and commodity moves. The HFN Emerging Markets Average was +2.47% in July and is +14.51% YTD and was aided by strong moves in China, India and Russia's equity markets. The HFN Latin America Average was +2.49% in July and +19.81% YTD.

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