Research

Hedge Fund Performance Commentary

Introduction

The Eurekahedge Hedge Fund Index slumped 0.34%1 during the month of June, as managers struggled under the volatile market situation driven by the escalating US-China tariff spat over the month. The transitory ceasefire in the trade war was effectively ended when the White House announced a 25% tariff on US$50 billion of Chinese exports on June 15, which prompted China to respond in kind. Roughly 46% of the hedge fund managers tracked by Eurekahedge managed to outperform the underlying global equity markets as represented by the MSCI AC World Index (Local) which declined 0.21% over the month. The Eurekahedge Hedge Fund Index wrapped the first half of 2018 with a positive yet unremarkable return of 0.08% after spending three months in the red, a far cry from the 3.36% gain posted by the index over the first half of 2017.

European and North American fund managers led the pack over the month as they barely slid into negative territory with 0.08% and 0.09% losses respectively. Despite the political uncertainties revolving around Italian government formation and Brexit deals, European equity markets proved to be more resilient compared to Asian and Latin American equity markets. Something similar could be said about North American equity markets, as the S&P 500 index edged 0.48% higher during the month despite the trade friction between the world’s two largest economies. On the other hand, Asia ex-Japan fund managers posted losses of 1.84% in June, dragged down by the poor performance of Chinese and Korean equity markets which were hit particularly hard by the tariffs announced by the Trump administration.

Figure 1: May 2018 and June 2018 returns across regions
 

On a year-to-date basis, North American fund managers were up 1.13%, outperforming their peers from other regions. The losses suffered by Latin American fund managers during the month brought them down to second place with a gain of 0.60% over the first half of the year. Meanwhile, the Eurekahedge Japan Hedge Fund Index which tracks hedge fund managers investing exclusively in Japan was down 2.70% as of June 2018 year-to-date, after suffering five consecutive months of losses. Geopolitical tension related to North Korea and trade friction risks between the US and China weighed on the performance of Japanese hedge fund managers.

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Footnote
1 Based on 55.10% of funds which have reported June 2018 returns as at 15 July 2018

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