Research

Hedge Fund Performance Commentary

Introduction

Hedge funds successfully traded their way around an overwhelming month in April and were up 0.55% while underlying markets as represented by the MSCI World Index (Local) gained 1.18% during the month. Investors' risk appetite improved in April amid waning concerns over trade war, bolstered by the ‘soft’ tone of Xi Jinping in response to US trade sanctions. Developed markets outperformed their emerging market counterparts during the month, as the latter still remained rather volatile with the region’s equity markets posting a slightly negative return during the month on the back of a strengthening US dollar and concerns over US-China trade spat. Equity markets rebounded in April with strength led by European and North American markets with mixed to flat performance across Asian equity markets. Economic data for Q1 2018 was largely encouraging albeit recovery was at a slower pace with indicators pointing towards global economic expansion. Meanwhile, 58% of the underlying constituent funds for the Eurekahedge Hedge Fund Index were in positive territory during the month, with nearly 5% of them reporting gains in excess of 5%. European hedge funds led performance among regional mandates this month, up 0.78% while distressed debt managers topped the table across strategies, gaining 1.12% over the same period.

On a year-to-date basis, hedge funds were up 0.23% while underlying markets declined 1.08%. Latin American hedge fund managers led the table on a year-to-date basis, up 5.00% followed by their Asia ex-Japan and European counterparts with gains of 0.71% and 0.52% respectively.

Figure 1: April 2018 and March 2018 returns across regions
 

Performance was a mixed bag across regional mandates with European hedge funds in the lead this month, gaining 0.78% as equity performance in the market showed fair strength, with European equities posting a relief rally at the outcome of the ECB’s recent meeting to change its monetary policy in a more gradual pace. North American mandates also bounced back in positive territory, up 0.27% during the month followed by Asia ex-Japan mandates which were up 0.14% over the same period. On the other hand, Japanese hedge fund managers languished into negative territory during the month, down 0.11% despite a pickup in USD sentiment led to weaker yen which lend some support to underlying equity markets with the Nikkei 225 Index up 4.72%. Political uncertainty plaguing the Latin American region particularly in Brazil, leading to considerable losses during the month – breaking its three consecutive month of gains since the start of the year. The Eurekahedge Latin American Hedge Funds Index declined a modest 0.02% in April.

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