NEW YORK (CNNMoney.com) -- Hedge funds appeared headed for another negative month, an industry tracker found, though the losses do not appear as significant as they were in May, when a meltdown in global markets and falling prices for metals dealt a tough hand to many funds.

Hedge funds posted an average return of negative 0.65 percent through the first three weeks of June, according to a research note from Merrill Lynch. For the year, these funds are up an average of 3.79 percent, according to the firm.

The S&P 500 Index is up 1.76 percent for the year, while the Lehman U.S. Aggregate bond index is down 1.05 percent for the year.

Hedge funds are private investment partnerships limited to institutional investors and wealthy individuals. Collectively, these funds manage about $1.2 trillion in assets, according to Chicago-based hedge fund tracker Hedge Fund Research.

Hedge funds use a variety of strategies, from betting on or against stocks, currencies or commodities to more esoteric strategies involving "derivative" investments or turning around distressed companies.

All but three of the strategies Merrill Lynch tracks were down for the first three weeks of June. U.S. long/short equity funds, which take both long and short positions in stocks and equivalent securities, were down 2.88 percent for the same period, according to the Merrill Lynch Hedge Fund Composite index. These funds are roughly flat for the year, according to the index.

Global macro funds, which invest in currencies and other instruments in markets around the world, are down 2.09 percent for the month through June 26 and up about 0.41 percent for the year. These funds also had a tough time last month owing to poor returns in international stock markets, posting losses of about 0.60 percent, according to the Credit Suisse/Tremont Hedge Fund Index.

Managed futures funds, which trade commodity futures contracts, are down 0.79 for the month. That's an improvement over last month, when sharp declines in metals markets dragged these funds down 2.7 percent, according to the Credit Suisse/Tremont Hedge Fund Index. But these funds are still up 5 percent for the year to date, thanks to strong performance for the year prior to May.

Several hedge fund strategies appeared to be flat to slightly negative for the month, though most are in positive territory for the year.

Convertible arbitrage funds, in which managers seek to profit from pricing differences in a convertible bond and the same company's common stock, suffered big losses last year but have rebounded strongly in 2006. These funds are up 0.60 percent for the month and 5 percent for the year to date through June 26.

The spate of mergers in 2006 has boosted event driven funds, which anticipate and seek to profit from corporate events such as mergers or restructurings. Event driven funds are down 0.41 percent through the first three weeks of June but are up nearly 5 percent for the year.

Merger arbitrage hedge funds, which seek to profit from the "spread" between the current market price of a company being acquired and the price once a deal has gone through, have also enjoyed a solid 2006, posting a 0.57 percent gain for the first three weeks of June and netting a 4.95 percent gain for the year.

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