Research

Hedge Fund Performance Commentary

Introduction

The Eurekahedge Hedge Fund Index ended the month of December down 1.31%1, dragging its year-to-date decline to 3.85% after five consecutive months of losses. Concerns over the US treasuries yield curve inversion and further Fed tightening in 2019 triggered a sell-off across the global equity markets, marking December as the worst month of 2018 for equity markets. Throughout the month, only 38.4% of hedge fund managers tracked by the Eurekahedge Hedge Fund Index were able to remain in the positive territory, while in comparison the global equity markets as represented by the MSCI AC World Index (Local) plummeted 7.61%. Less-dovish-than-expected Fed stance, combined with weakness in the tech sector over global growth slowdown continued to weigh on the US equity markets, and resulted in 9.18% and 8.66% losses for the S&P 500 index and the Dow respectively – the worst December performance since the Great Depression for the latter. On the other hand, uncertainties continued to loom over the European economies as Brexit negotiation remained inconclusive, despite the Italian government’s success in striking a deal with the European Union over their budgetary planning. Looking at year-to-date performance, preliminary numbers revealed that roughly 8.6% of the hedge fund managers tracked by Eurekahedge were still able to maintain double-digit returns throughout 2018 despite all the challenges the industry has faced.

North American hedge fund managers ended the month down 3.21%, as the underlying equity markets recorded their worst month of 2018. The Eurekahedge Japan Hedge Fund Index slumped 3.79% during the month, underperforming their peers from the other Asian regions. In comparison, the Nikkei 225 index and the TOPIX were down 10.33% and 10.40% respectively in December.

Figure 1: December 2018 and November 2018 returns across regions
 

On a year-to-date basis, North American fund managers were down 2.87%, as the losses they posted in October and December wiped out a significant portion of the gains made in preceding months. Latin American fund managers were up 7.66% year-to-date, owing to the underlying equity market performance which benefited from improving economic outlook and dwindling political concerns. Meanwhile, Asian fund managers continued to lag behind their peers focusing on other regions despite the improving progress of the US-China trade talk, with the Eurekahedge Asia ex-Japan Hedge Fund Index and the Eurekahedge Japan Hedge Fund Index down 9.38% and 9.53% respectively over the year.

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Footnote
1Based on 40.89% of funds which have reported December 2018 returns as at 11 January 2019.

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