Just like 2004, hedge funds seem to be pulling themselves out of a performance slump at the beginning of the year. As of the end of July, Hedge Fund Research’s fund-weighted composite index was showing a year-to-date gain of 4.1 per cent, comfortably beating US dollar cash returns.

Only one of the sectors listed by HFR was showing a negative performance for the year to date. That was convertible arbitrage, which suffered significantly from redemptions in the spring, forcing managers to sell into a falling market. Nevertheless, the performance of the sector has not been as smooth as some of the enthusiasts might have liked. Half the industry’s return on the year-to-date came in July alone.