From Precy Dumlao, Opalesque Asia:

The hedge fund industry’s losses in April demonstrate "how dysfunctional governments in Europe and the U.S. can only give negative impact for the markets," according to Aaron Miller, President of Chicago, Illinois-based hedge fund AM Capital LLC

All major hedge fund indices reported losses in April with hedge fund data provider Hedge Fund Research reporting that its HFRI Fund Weighted Composite Index declined -0.36% during the month (+4.42% YTD) on investors’ resurgent concern over the European sovereign debt crisis and uncertainty surrounding the outcome and implications of European elections. The Eurekahedge Hedge Fund Index also fell -0.07% during the month as well as the Hennessee Hedge Fund Index which reported a -0.38% decline in the same period (+4.02% YTD).

"The macro outlook took a turn for the worse with Europe coming back into the daily markets and now the leaders who agreed on austerity lost their elections," Miller said. "I am more in favor in the short term of printing money than complete austerity however the fact that things are so uncertain in Europe can’t be a positive for the market. And micro factors also took a minor turn for the worse because it shows that how a dysfunctional government which Europe has as well as U.S. can only be a negative for the markets. Additionally as election heats up it’s going to put a microscope on our debt and inability to agree on how to pay it down other than grow the economy." Miller told Opalesque in an exclusive interview.

Miller was referring to the huge losses suffered German chancellor Angela Merkel’s Christian Democratic Union-led conservative coalition which lost big in a major state election Sunday in the country’s most populous state, North Rhine-Westphalia, which shows her party won backing from only about one-quarter of voters, down from more than one-third in the last election.

Francois Hollande also defeated another austerity champion, Nicholas Sarkozy, in the French elections. Hollande’s focus is on growth instead of austerity. At the same time, Greek voters made their feeling about spending cuts loud and clear.

Miller’s AM Capital was down -4.13 in April versus its benchmark the DOW index +0.01%, NASDAQ -1.46%, S&P 500 index at -0.74%, and Russell 2000 Index -1.44. Since inception in July 2009, AM Capital’s performance was up 54.02% at end of April 30, 2012 return versus the DOW index 56.42%, NASDAQ 65.01%, and the S&P 500 index at 51.81% over the same period of time.

According to Miller, over the past two years, every time Europe flares up the market goes down quickly. "In 2011 it accelerated 20%. I am not expecting this type of acceleration in a six day period since the 2011 movement was one of three of the biggest moves in the history of the market. However I still think equities are going to produce more favorable returns than bonds.

In the near term, Miller said he is "cutting down a little" on the leverage, but still believes there are opportunities on the long side in the energy, financial, & gaming sectors.

"In the near term and the rest of the year, I am turning into a pure stockpicker but one has to prevent being in a name that can have huge downside moves. It is easier said than done. I plan on emphasizing on quality companies with not a lot of debt, good balance sheets, with growth potential that have been beaten up. I feel that will bear fruit overtime and if one buys right the downside is somewhat limited," Miller commented.