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Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index was up 0.26%1 in June, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 1.93% over the same period. Covid-related mobility restrictions in most developed markets continued to be progressively relaxed as vaccination rates rise, providing support to the reopening of their economies. The swift rebound in economic activity led to higher inflation in some countries, most notably in the United States where in June, the US consumer price index increased by 5.4% year-on-year – the sharpest 12-month inflation spike since August 2008. This has led to concerns that the continued higher inflation would compel the Federal Reserve to act earlier than expected to pull back on its ultra-low interest rate policies and potentially derail the economic recovery. Nevertheless, the Federal Reserve regards the surge in inflation as a temporary phenomenon and will consider rate hikes only after the economy has made substantial progress towards a strong recovery. The S&P 500 and NASDAQ closed the first half of 2021 at or near record highs, rising by 2.22% and 5.49% in June respectively, supported by the rebound in economic activity as more people return to work. Over in Europe, returns were mostly positive among equity benchmarks in the region with the CAC 40 and DAX index taking the lead with gains of 0.94% and 0.71% respectively. Returns were mostly positive across geographic mandates in June with Latin American and North American hedge funds in the lead with returns of 1.47% and 1.13% respectively while European hedge funds were down 0.17%. Across strategies, distressed debt, multi-strategy and long/short equities outperformed their strategic peers with returns of 1.93%, 0.73% and 0.72% respectively throughout the month.

Roughly 58.2% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in June, and 30.6% of the hedge fund managers in the database were able to maintain a double digit return in 2021.

Figure 1: June 2021 and May 2021 returns across regions

Figure 2 illustrates the 2021 performance of hedge fund managers across regions. As of June year-to-date, all of the geographic mandates have recorded positive returns. Global hedge funds registered their best June year-to-date return since 2009 as they returned 8.09%, supported by the US$1.9 trillion economic stimulus package rolled out by the Biden administration as well as the continued speedy rollout of COVID-19 vaccinations. North American hedge funds outperformed their regional peers with their 11.54% return, followed by Asia ex-Japan hedge funds which returned 7.78%. At the other end of the spectrum, Latin American hedge funds lagged behind the group with a return of 4.28%.

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1Based on 67.23% of funds which have reported June 2021 returns as at 19 July 2021
2MSCI ACWI (Local)