Research

Hedge Fund Performance Commentary

Introduction

The Eurekahedge Hedge Fund Index was up 1.83% in June1, recording its strongest first half return of 5.84% since 2009. Hedge fund managers benefited from strong equity market performance on the back of optimism over the progress of US-China trade talks and the growing expectation of a rate cut of the Federal Reserve over the month. The global equity market as represented by MSCI ACWI (Local) gained 5.41% during the month. The expected meeting of the US President Donald Trump and his Chinese counterpart Xi Jinping during their G-20 summit in Osaka renewed investor optimism on the resolution of the trade conflict which has plagued the market since last year. Meanwhile, weak economic data combined with rising concerns of a global economic slowdown prompted the Federal Reserve to reassess their stance. The expectations that the Fed will soon cut rates resulted in declining bond yields throughout the month, with the US 10-year bond yield dipping to its lowest level since November 2016.

Approximately 78.2% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in June, and 24.7% of the fund managers in the database were able to generate double-digit returns over the first half of the year. Returns were positive across regions, with Asia ex-Japan fund managers up 2.04% as investor confidence on the continuation of US-China trade talks acted as tailwind for the region’s equity market. Fund managers focusing on North America also benefited from the equity market rally and gained 1.94%. Both mandates had recorded strong first half performance on the back of robust economic growth and accommodative central bank policies. North American hedge funds have returned 7.04%, ahead of their Asia ex-Japan peers who were up 6.37% over the first six months of 2019.

Figure 1: June 2019 and May 2019 returns across regions
 

Figure 2 illustrates the year-to-date performance of hedge fund managers across regions. Supported by the strong performance of the global equity and bond markets, all regional mandates were up for the year, with Latin American hedge funds leading the pack with their 8.27% return. On the other end, fund managers focusing on Japan have returned 2.61% year-to-date, trailing behind the other regional mandates.

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Footnote
1Based on 43.88% of funds which have reported June 2019 returns as at 11 July 2019

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