Sept. 13 (Bloomberg) -- Hedge funds investing in Japan had their worst monthly performance for seven years in August, as global stock-indexes fell on fallout from U.S. subprime mortgage defaults, according to Eurekahedge.

The Eurekahedge Japan Hedge Fund Index, which tracks 124 funds investing in Japan, fell 3.4 percent in August -- the biggest drop since it started in January 2000, according to Eurekahedge, a Singapore-based hedge-fund research and publishing company. So far, 55 percent of the index constituents have reported their monthly performance data, according to Eurekahedge.

Still, Japanese hedge funds have seen only limited impact from the global credit crunch that has roiled stock markets worldwide and led to the collapse of two Bear Stearns Cos. hedge funds. The Topix index declined 5.7 percent in August, driving the benchmark to its biggest weekly drop since the end of the asset inflation ``bubble'' of the 1980s in the five days to Aug. 17. The Nikkei 225 Stock Average lost 3.9 percent last month.

The Eurekahedge Hedge Fund Index, which tracks performance of hedge funds globally, slid 1.8 percent and the index tracking Asian hedge funds dropped 2.1 percent in August, Eurekahedge data showed.

Hedge funds are largely unregulated investment pools that can bet on falling as well as rising asset prices. Their managers gain substantially from profits on money invested.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net.

Last Updated: September 12, 2007 23:40 EDT