The Eurekahedge Hedge Fund Index was up 0.14%1 in January, ahead of the underlying equity market as represented by the MSCI ACWI (Local) which lost 0.90% over the same period. Global equities rallied earlier into the month, supported by the easing tension in the Middle East and the signing of the US-China phase-one trade deal. The S&P 500 and the tech-heavy NASDAQ returned 2.29% and 1.97% respectively for the week ending January 17. However, market sentiment shifted rapidly towards the end of the month, following the coronavirus outbreak in China. Investors feared that the epidemic, which draws parallel to the SARS outbreak in 2003 might have an adverse impact on the global economic outlook. The Shenzhen and Shanghai benchmarks were down 8.45% and 7.72% on February 3, after the onshore markets reopened following the Chinese New Year holiday. The two market benchmarks partially recouped their losses over the following days thanks to the liquidity injection introduced by the PBOC, as well as the tariff reduction on US imports. Over in Europe, the FTSE 100 ended January down 3.40%, underperforming other European equity markets as strong British pound weighed on UK equities. Meanwhile, global government bonds posted gains during the month, driven by the risk-off sentiment in the market which pushed yields lower.
Approximately 56.0% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in January, and 37.6% of the fund managers in the database were able to generate double-digit returns in 2019. Returns were mixed across regions, with Asia ex-Japan fund managers up 0.93% in January, in spite of the COVID-19 outbreak which contributed to the weak performance of the equity market in the region. Fund managers focusing on North America lost 0.11%, despite encouraging geopolitical developments and strong corporate earnings. Looking at 2019 returns, Asia ex-Japan hedge funds have returned 12.04%, ahead of their North American peers who were up 9.06%.
Figure 1: January 2020 and December 2019 returns across regions
Figure 2 illustrates the 2019 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 15.94% return. On the other end, fund managers focusing on Japan have returned 6.44% year-to-date, trailing behind the other regional mandates.
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