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NEW YORK (Reuters) - Hedge fund returns inched up 0.7 percent in August as the U.S. stock market continued its third-quarter rally, according to industry tracker eVestment|HFN.
It was the third consecutive month of gains for the more than $2 trillion hedge fund industry, helping to push average yearly returns to 4.1 percent, data released on Thursday showed.
Still, hedge funds on average trailed the broader stock market, which gained 2.25 percent last month. The Standard & Poor's 500 stock index rallied 13.5 percent through August 31.
Credit-focused funds, which have been one of the best-performing strategies in 2012, continued to make strides in August, rising 1.14 percent, the data showed. Those funds are up 7.5 percent, on average, year to date.
"There have been massive flows into credit strategies over the last seven months," said Peter Laurelli, head of industry research for eVestment|HFN, which noted that performance drivers for credit-focused funds have included opportunities in the Eurozone, as well as the strength of mortgage and securitized credit markets here in the United States.
Phoenix Investment Adviser, a $525 million credit fund focused on stressed U.S. corporate bonds, crept up 0.8 percent last month, and has gained almost 15 percent this year, according to BarclayHedge. The roughly $2 billion MKP Credit fund was up almost 8.2 percent this year through August, with gains of 1.6 percent, according to a person with knowledge of the numbers.
Stock funds also posted solid gains in August, rising 1.3 percent. Equity-focused funds suffered big losses in 2011, but have regained their footing this year, up 4.67 percent for the year through August 31.
Ken Griffin's hedge fund Citadel saw its equities fund rise 1.55 percent in August, pushing year-to-date returns to about 11.5 percent, according to two people familiar with the numbers. The roughly $13 billion fund's flagship Kensington and Wellington funds also gained 1.7 percent in August, up almost 14 percent for the year.
Meanwhile, funds that specialize in event-driven and distressed strategies rose 1.07 percent last month, pushing yearly gains to 3.9 percent.
The flagship portfolio of New York-based Jana Partners, a roughly $3 billion event-driven fund managed by Barry Rosenstein, advanced more than 3 percent in August, according to an investor who was not authorized to speak publicly. That fund is up roughly 16 percent for the year.
Managed futures and FX focused funds battled to make gains last month, but macro funds edged up 0.22 percent, helping year-to-date returns reach 1.3 percent.
Fortress Investment Group's (FIG.N) macro fund gained 1.43 percent in August, sending yearly returns to 7.24 percent. The firm's Fortress Asia Macro Fund lost some ground last month but is still up 8.4 percent for the year, according to a regulatory filing.
Los Angeles-based Commonwealth Opportunity Capital, a global macro fund that has focused on investment opportunities in the crisis-addled Euro zone this year, gained roughly 2.47 percent last month, with returns through August 31 hitting about 13 percent.
Funds with more than $1 billion under management recorded their best performance since January, eVestment|HFN data showed.
Reporting By Katya Wachtel, additional reporting by Svea Herbst-Bayliss; Editing by Leslie Gevirtz