The second half of 2008 is unlikely to resemble the first half, if the dollar continues to regain ground against the euro and sterling, and if oil prices continue to soften. But for investors, the story in the first half of the year has been about commodities, which is the top-performing asset class year-to-date.

The Dow Jones AIG Commodities Index has returned 27.2% through end June, topping 23 major global asset class indices, and continuing the strong performance it enjoyed in 2007, according to data compiled by Pimco.

Private equity has been the first halfÆs other strong performer, with the Cambridge Associates US Private Equity Index up 16.2% year-to-date. In this case, however, gains may rest more on the laudable performance numbers tallied in 2007 and early 2008; the index has actually lost 1.3% in the second quarter of 2008.

Other alternative asset classes have fared miserably, however. The CSFB/Tremont Hedge Fund Index is up a mere 0.5% year-to-date, below cash (the Citigroup 3-month T-bill Index is up 1.1%). Real estate is in negative territory still û this asset class had a terrible 2007 and its woes continue, with the Dow Jones Wilshire Reit Index down 3.4% year-to-date (with most losses occurring in the second quarter).

Among traditional asset classes, safe-haven assets have done reasonably well, while risk assets have suffered. In bond-world, the best bet was not to be in dollars, and to protect against inflation. The JPMorgan Non-US Unhedged index of foreign bonds gained 5.5% year to date, while the Lehman US Tips Index rose by 4.9%. Again, the dollarÆs recent rallies suggest at least one of these factors may change in the second half.

High yield, on the other hand, has suffered in 2008, losing 1.2%.

Equities presented a tableaux of horror around the world. US growth and value indices, along with indices for Japan, the UK, Germany and the world, are all deep in negative territory. The worst of the lot: the Russell 1000 Large-cap Value Index (-13.6%) and the MSCI Emerging Markets Index (-12.7%).

Yet among hedge funds, certain strategies clearly outperformed while others have fallen by the wayside. While the CSFB/Tremont barely hovered in positive territory, certain sub-strategies have done very well, most notably dedicated short; this component of the CSFB/Tremont has enjoyed returns of 12% year-to-date (and 21% on a 12-month basis). The party may have ended, however, as three-month returns are only 1.9%, suggesting the big gains in shorting have already been realised.

Two other sub-strategies that have done well (also with the most returns achieved in the first quarter) are managed futures (14.9% gain, another reflection of the strong performance in commodity funds) and global macro (up 9.2% year-to-date).

But most other strategies have lost money so far this year, including convertible arbitrage (down 5.6%) and fixed-income arbitrage (minus 4.1%).

One final observation: on a global basis, long/short equity hedge funds are down 0.5% year-to-date, which is in aggregate better than how peers have fared in Asia. It is yet more evidence that AsiaÆs hedge-funds industry, which is weighed down by too many long/short equity funds (most of which are long-biased), must learn to short securities in order to justify those 2-and-20 fee structures.