Research

Hedge Fund Performance Commentary

Introduction

Hedge fund managers successfully remained in the positive territory over the month of May, with the Eurekahedge Hedge Fund Index up 0.33% over the month, supported by the recovery of the global equity markets as represented by the MSCI AC World Index All Cap (Local) which gained 0.84%. Concerns over the trade war between the US and China, as well as geopolitical risks over the Korean peninsula dwindled nearing the end of the month, as the involved parties exhibited amiable dispositions. The armistice in the middle of the US-China tariff war and the results of the Trump-Kim summit held in Singapore in early June might provide a much needed relief for the East Asian equity markets which have been struggling since the start of the year.

North America and Asia ex-Japan focused hedge funds posted the strongest performance as they gained 1.43% and 1.26% respectively, while Latin American hedge funds posted losses of 4.07% over the month, due to the political uncertainties in the region and weakness of the currencies against the greenback. On a year-to-date basis, the Eurekahedge Hedge Fund Index is up 0.48%, and with the exception of Japanese fund managers who lost 1.88% over the first five months of 2018, all regional mandates managed to stay in the positive territory.

Figure 1: April 2018 and May 2018 returns across regions
 

Across geographic mandates, performance was a mixed bag with North American fund managers in the lead, returning 1.43% in May, bringing their year-to-date return back to positive territory after spending three consecutive months below their end-2017 levels. Nearing the end of the month, equity markets in the region rallied following the confirmation that the Trump-Kim summit would ultimately take place, after various spats between the two involved parties which almost resulted in the withdrawal of the US from the summit. Investor confidence also recovered after China and the US called a truce over the ongoing tariff war which started several months ago.

On the other end of the spectrum, Latin American hedge funds languished as they posted losses of 4.07% during the month as the region’s underlying equity markets suffered steep losses. The MEXBOL index slid 7.53% in May as the failure of NAFTA renegotiations cast doubt on the country’s trade over the next few years. Over in Brazil, the countrywide trucker strike caused by disputes over diesel price paralysed the country’s economy for nearly two weeks, dragging the Ibovespa down 11.66%.

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