Hedge funds rebounded strongly in August to close the month up 1.30%1, trailing underlying markets as the MSCI World Index2 gained 2.48% on the back of modest growth figures which were driven largely by an improving outlook for the US economy. August witnessed another renewed wave of investor optimism which continued to push global equity markets higher and volatility back down. The divergence in economic policies between the US and European central banks was quite a major theme during the month, with the ECB embarking on its quantitative easing program in earnest even as the Fed debates over the timing of future interest rate hikes, leaving the euro reeling while driving the dollar higher. Markets in Greater China and Japan ended the month flat to slightly negative as macroeconomic numbers from China pointed towards a slowdown in the economy but was seen to prompt more stimulus measures from the Chinese government.
Figure 1: June and July 2014 returns across regions
Asia ex-Japan managers were the best performers during the month, returning 2.87% as regional markets were lifted by improving macroeconomic data coming out of China which appears to have backed away from the edge. The best gains were seen in Greater China – the buoyant mood spreading to Japanese stocks as well, contributing to the Nikkei 225 Index’s 3.03% gain in July. Japanese managers were up 0.72% during the month.
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1Based on 51.20% of funds which have reported August 2014 returns as at 15 September 2014
2MSCI AC World Index(Local)
3 MSCI Emerging Markets Index (IMI- Local)