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Hedge funds posted more gains last month, providing fresh evidence that the $1.4 trillion industry is recovering after last year's heavy losses and record redemptions.
The average hedge fund gained 2.42 percent in July after having inched up 0.13 percent in June, data released Friday by performance and flows tracking group Hedge Fund Research show.
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On average the funds are up 12.17 percent for the year through July 31, the data show.
"Overall, the hedge fund industry is continuing to build itself back up from the low points," said Scott Esser, chief operations officer for the Hedge Fund Research in Chicago.
Strong "equity market returns had a lot to do with it and the return of credit and decrease of volatility has helped," he added.
The returns still fell short of the Standard & Poor's 7.4 percent rise in July. Last month, the Dow industrials had their best July since 1989 and the S&P 500 and Nasdaq recorded their best gains for July since 1997.
Still, the figures marked the fifth consecutive month of gains for the hedge fund industry, which posted a record 19 percent loss in 2008. The industry saw investors pull out a record $152 billion in the last three months of 2008.
This year, July returns were driven by strong performances at fixed-income funds that specialize in "convertible arbitrage" strategies that match the purchase of convertible bonds with short positions. The these funds were up 7.27 percent in July on average and up 38.63 for the year.
Many hedge fund managers have benefited from the recent stock market rally and have said they expect better returns to help attract fresh money from pension funds and endowments in the months ahead.
Other strong hedge fund strategies included funds using quantitative directional strategies, whose index was up 5.18 percent in July, and regional funds. On average Asia-focused strategies, excluding Japan were up 5.95 percent in July, followed by Latin American-focused hedge funds, up 5.56 percent, according to their indexes.
Data is a real-time snapshot *Data is delayed at least 15 minutes