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Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index was up 1.85% in August, bringing its year-to-date return to 3.79% and its five-month trailing return to 12.85% since end-March. The robust performance of the global equity markets on the back of the encouraging development of the COVID-19 vaccine and improving macroeconomic data supported hedge fund managers' performance. In the US, the declining daily COVID-19 cases on top of the Fed's new inflation targeting framework boosted the region's equity market. The tech-heavy NASDAQ recorded the strongest return of 9.59%, while the S&P 500 was up 7.20% in August. The Fed shifted its approach to inflation to 'average inflation target' aiming to achieve an average inflation rate of two percent over time, which were expected to result in keeping the interest rates lower for an extended period. In the same vein, European equities were also up, with DAX and CAC 40 up 5.13% and 3.42% return throughout the month respectively. Over in Asia, despite PM Shinzo Abe's resignation that sent the market lower, the Nikkei 225 ended the month up 6.59%. The drop in stock prices was short-lived as investors expected that the next administration would continue the current economic policies. Returns were positive across geographic mandates in August with fund managers focusing on Japan up 4.28%, outperforming their Asia ex-Japan and North American peers who were up 3.15% and 2.39%, respectively. Across strategies, long/short equities, event driven and relative value fund managers were up 2.87%, 2.36% and 1.96% respectively throughout the month.

Roughly 74.1% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in August, and 22.5% of the hedge fund managers in the database were able to maintain double-digit returns over the first eight months of 2020.

Figure 1: August 2020 and July 2020 returns across regions

Figure 2 illustrates the 2020 performance of hedge fund managers across regions. Most regions were still down over the first eight months of the year, attributed to the spread of COVID-19 which resulted in the massive sell-off in risk assets in the earlier months of the year. Supported by the strong performance of Chinese equities, Asia ex-Japan hedge funds led the pack with their 11.69% return – followed by North American hedge funds who were up 4.13% as of August 2020. On the other hand, Japanese and European hedge funds underperformed the group as they were down 2.96% and 1.54% respectively.

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