Indices

Main Indices

Regional Indices

Performance was a mixed bag across regional mandates with European hedge funds in the lead this month, gaining 1.14% as equity performance in the market showed fair strength, with European equities posting a relief rally at the outcome of ECB’s recent meeting to change its monetary policy in a more gradual pace. The CAC Index ended the month up 6.84% and the DAX Index was up 4.26% over the same period. Asia ex-Japan mandates also bounced back in positive territory, up 0.32% during the month. Chinese equity markets came under pressure in April as tech firms in the mainland faced pressure amid the ZTE ban imposed by US earlier in the month with the CSI 300 Index down 3.63% and down 6.80% year-to-date. Moreover, economic indicators coming out of China indicate that growth in the economy was staying steady and in line with expectations. Over in North America, risk appetite improved as US-China trade sanctions eased somewhat during the month. US treasury yields edged up higher backed by solid corporate Q1 earnings coupled with reduced trade worries and higher US inflation numbers. This has lifted US dollar to a record high since the start of the year and supported gains in US equities with the NYSE Composite and S&P 500 up 0.51% and 0.27% respectively. The Eurekahedge North America Hedge Fund Index was up 0.27% in April, with underlying equity long/short strategies being positive contributors with gains of 0.96%. On the other hand, political uncertainty plaguing the Latin American region particularly in Brazil, led to considerable losses during the month – breaking its three consecutive month of gains since the start of the year. Despite these concerns, the region’s equity markets were in the green during the month with the Ibovespa Index up 0.88% in April. Mexico’s equity markets also gained 4.84% over the same period. The Eurekahedge Latin American Hedge Fund Index declined 0.71% in April. Japanese hedge fund managers also languished into negative territory during the month, down 0.63% despite a pickup in USD sentiment led to weaker yen which lent some support to underlying equity markets with the Nikkei 225 Index up 4.72%.

On a year-to-date basis, Eastern Europe and Russian managers topped the tables and were up 5.41%, followed by Latin American and emerging markets hedge fund managers with gains of 4.27% and 1.45% respectively. Asia ex-Japan and European hedge fund managers were also up year-to-date gaining 0.85% each while Japanese and North American managers languished into negative territory year-to-date, down of 2.20% and 0.71% respectively.

Strategy Indices

All strategic mandates ended the month in positive territory with distressed debt managers leading the pack up 1.24% with the help from a strong showing in the US and European high yield sector during the month. Macro hedge fund managers gained 0.97%, and some macro funds with short exposure into the yen reaping gains during the month as higher US interest rates saw the yen weaken relative to US dollar. Long/short equities managers also rebounded in April and were up 0.69% as average fund performance across the globe was largely positive amid reduced trade war concerns. Strength in equity market performance was led by European and North American markets with mixed to flat performance across Asian equity markets. Event driven managers gained 0.66% in April, as managers with exposure into Europe posted good gains during the month with deal activity within the telecommunication services (supported by M&A activity) and energy space among performance contributors. Relative value hedge funds also posted good gains during the month and were up 0.45% with performance led by underlying relative value volatility strategy (+1.12%). Among volatility-focused hedge funds, short volatility hedge fund managers topped the tables with gains of 3.60% in April whereas long volatility hedge fund managers posted the steepest decline, down 2.63% as volatility levels represented by the CBOE VIX Index fell during the month after its unstoppable uptrend since the start of the year.

CTA/managed futures hedge funds were up 0.25% in April with underlying trend following-focused hedge funds leading much of the weakness, down a modest 0.09% as trading conditions in currencies and metals were rather choppy. The greenback gained ground during the month with the US Dollar Index up 2.08% as 10 year yields hit the psychologically important 3% mark. Managers reported losses on short USD positions against the basket of emerging currencies. The short USD position against GBP was the biggest performance detractor to most managers as the sterling weakened during the month amid weaker than expected economic data, casting some doubts over the probability of interest rate hike by the BOE in May. Long exposure into precious metals was also among performance detractors for CTA/managed futures funds as the rebound in US dollar led precious metals, particularly gold, to trade lower during the course of the month. On the contrary, long exposure to energy remained to be profitable for managers. Oil prices climbed above US$74 a barrel amid robust demand and OPEC production cuts. The rise came on the back of increasing expectations of sanctions against Iran, triggered by President Trump’s threats to withdraw from the Iran nuclear deal. The rise came on the back of increasing expectations of sanctions against Iran, triggered by President Trump’s threats to withdraw from the Iran nuclear deal. The rise came on the back of increasing expectations of sanctions against Iran, triggered by President Trump’s threats to withdraw from the Iran nuclear deal affected much of the outlook on the oil industry. Managers also posted gains on long exposure into base metals, particularly in aluminium as it rallied sharply during the month backed by the US new sanctions on Russian metals producer which led to supply concerns. Arbitrage and multi-strategy hedge funds followed next gaining 0.19% and 0.17%. Fixed income mandated hedge funds posted a modest gain of 0.09% during the month, with gains realised from long exposure into German and US fixed income instruments which traded higher during the month.

On a year-to-date basis, distressed debt hedge fund managers were up 4.15% followed by relative value hedge fund managers which gained 1.84%. Macro and fixed income managers were also up 0.85% and 0.67% respectively, followed by long/short equities and event driven managers which trail closely behind, up 0.64% each over the same period. On the other hand, CTA/managed futures hedge fund managers were down 1.50% with weakness lead by underlying trend-following-focused strategies, declining 3.19% year-to-date.

Table 1: Index Flash Strategy Return Map

* Based on 25.21% of funds which have reported April 2018 returns as at 8 May 2018

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