Indices

Main Indices

Regional Indices

Across geographic mandates, performance was a mixed bag with North American hedge funds in the lead, returning 1.14% in May, bringing their year-to-date returns back to positive territory after spending three consecutive months underwater. American equity markets showed solid performance over the month with major indices posting positive gains, as concerns over potential trade war with China started to dwindle. Nearing the end of the month, both the US and North Korea confirmed that the Trump-Kim summit will indeed take place, after various spat between the two parties, which almost ended in the withdrawal of the US from the summit. European fund managers generated meagre but still positive return of 0.17% in May, as the resurgence of political risks in Italy whittled down the gains made by managers over the month.

Fund managers focusing on emerging markets, especially Eastern Europe and Latin America posted the steepest losses over the month, with the Eurekahedge Eastern Europe & Russia Hedge Fund Index down 4.36% and the Eurekahedge Latin American Hedge Fund Index down 4.14%. Fund managers with high exposure to Russia suffered losses due to the trend reversal in the equity market’s recovery after the significant decline back in April. The signal of recovery in early May prompted fund managers to go into long positions, only to discover that not only did the rally stall, but also that large cap equities underperformed the benchmark index, exacerbating the losses. Over in Latin America, the strength of the US dollar put significant downforce on Mexican and Brazilian managers. On top of that, Mexican equities came under pressure as NAFTA renegotiation stalled, while Brazil’s economy was paralysed for nearly two weeks thanks to the countrywide trucker strike over diesel price. These challenges wiped a significant portion of the gains made by Latin American fund managers over the first four months of 2018, and allowed Asia ex-Japan managers to top the regional mandate table on a year-to-date basis with their 1.06% return.

Strategy Indices

Looking at strategic mandates, event driven hedge fund managers lead the pack with their 1.69% gain over the month of May, supported by the M&A activities in the banking sector, as major organisations such as the ECB and the IMF began urging consolidation, contrary to how they have historically positioned themselves on M&A among large banks. Major performance contributors to event driven hedge funds in May include the spin-off of Altice USA from the Netherlands based parent company, as well as the potential acquisition of NXPI by Qualcomm. Relative value hedge funds gained 0.53% in May, with three of the four underlying volatility strategies posting positive gains over the month, as the CBOE VIX Index dropped to levels last seen before the spike in early February this year. The CBOE Eurekahedge Relative Value Volatility Index gained 1.55% in May, outperforming its volatility index peers.

CTA/managed futures hedge funds lost 0.08% over the month, despite the strong performance of its underlying sub-strategies. The Eurekahedge Commodity Hedge Fund Index gained 0.99% in May, supported by rising industrial metal prices, especially nickel, as indicated by the S&P GSCI Nickel Index’s 11.52% over the month. On the other hand, the Eurekahedge FX Hedge Fund Index gained 0.54%, with strong US dollar being the major theme again. Long US dollar positions against Turkish lira, Brazilian real, as well as Mexican peso were among key contributors to performance for FX fund managers. Meanwhile, fixed income hedge fund managers ranked last among the major strategic mandates, losing 0.79% in May as the Italian president Sergio Mattarella's decision to veto the new coalition’s proposal for finance minister triggered a BTP selloff due to investors fleeing to safer German and US treasuries. The 10-year US treasury yield slid back to around the 2.8% mark by the end of May.

On a year-to-date basis, distressed debt hedge funds maintained their position at the top with their 4.48% return, owing to the gains made earlier this year from their exposure to Puerto Rican debts. On the other end of the spectrum, CTA/managed futures are still down 1.56% as of May 2018 year-to-date, as fund managers utilising this strategy are still unable to recover the losses incurred in the volatile month of February this year. Fund managers trading crypto-currency assets are still down 22.71%, as the prices of major coins failed to recover to their pre-2018 levels. Bitcoin price has fallen 45.98% as of May 2018 year-to-date.

Table 1: Index Flash Strategy Return Map

* Based on 35.81% of funds which have reported May 2018 returns as at 11 June 2018

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