Hedge funds were up 0.48%1 in September outperforming underlying markets, as represented by the MSCI AC World Index (Local) which gained 0.19% during the month. The trading scene was affected by a series of macro data, central bank meetings, OPEC and to a lesser extent the US Presidential debate. Strong jobs data throughout the past couple of months added to the rate hike anticipation at the Fed meeting, which however, ended with no action. The recent encouraging outcome of the OPEC meeting led to sustaining oil prices and stronger performance of commodity currencies versus the greenback mid-month onwards. Among regional mandates, Japan managers led the table, gaining 1.27% while distressed debt hedge funds lead gains among strategic mandates, gaining 1.12% in September.
On a year-to-date basis, hedge funds are up 3.33%, while the MSCI AC World Index (Local) was up a close 3.37% over the same period. Close to 15% of managers posted double digit returns in excess of 10% in 2016 year-to-date, with long/short equities and CTA/managed futures mandated hedge funds featuring strongly in this pool.
The US presidential elections will be the key to watch out for next month as Americans go to polls on November 9. Though polls are placing Hillary Clinton in the lead, and Trump’s locker room talk has been a disaster for his campaign, it might still be too early to write him off. With the memory of Brexit still fresh in our minds, it is perhaps best to remember that polls may not be telling it all and democracy may yet undermine itself again in 2016.
Figure 1: September 2016 and August 2016 returns across regions
All regional mandates were up in September with Japan mandated hedge funds leading the table, gaining 1.27% despite the Nikkei 225 and Tokyo Topix ending the month down 2.59% and 0.51% respectively. Japanese equity markets traded higher at the start of the month as better US jobs data resulted in some yen weakness. However, Japanese markets declined as the Fed postponed the much anticipated rate hike and together with the concerns over the Deutsche Bank saga, yen was driven higher towards month-end. North American hedge funds were up 0.93% during the month, outperforming the S&P 500 Index which declined 0.12% as a series of events from the US Presidential Debates and banking woes from Europe led to investor jitters. Latin American hedge funds were up 0.85% outperforming the MSCI Latin America Index IMI (Local) which declined 0.30%. Asia ex-Japan and European hedge fund managers were also up this month, gaining 0.48% and 0.45% respectively.
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