Hedge funds reported their third consecutive month of gains, returning 0.78%1 and outperforming underlying markets as the MSCI World Index2 finished the month down 0.39%. Global equity markets performance was mixed, with overall gains seen in Europe and Japan while US equity markets retreated following weaker durables data signalling that perhaps the stronger dollar is finally beginning to bite into the US economic recovery. Although expected, the Federal Reserve made headlines during the month by dropping the word ‘patience’ from its statement during the month, opening up the possibility of an interest rate hike as soon as June but simultaneously reassuring investors that any rise would be gradual. European Central Bank quantitative easing remained in full effect, pushing Eurozone government bond yields further into unprecedented negative territory. Meanwhile, Greece moved dangerously closer to a default as funds began to run low while negotiations appeared to be at an impasse. While European governments and banks have made contingency plans for a Greek default, the full impact of a ‘Grexit’ remains unknown.
Asia ex-Japan managers were the best performers during the month, returning 2.08%. Greater China equities were a major winning theme - the CSI 300 Index soared 13.74% amid speculation that the government would take steps to support faltering economic growth, while Chinese property developers rallied sharply as the government enacted policies to urge local authorities to restrict land supply. European funds were also up 0.98%, although following underlying markets higher as the MSCI Europe Index3 gained 0.76% on Euro weakness and the prospect of a delay in US interest rate hikes. Funds focused on Latin America and North America outperformed underlying markets which were in negative territory, gaining 0.70% and 0.49% respectively. The US S&P 500 Index ended the month lower by 1.74% as a strong dollar and weak corporate earnings growth put a dent in investor optimism. Japanese managers came in last place with gains of 0.17%, trailing the Nikkei 225 which climbed 2.18%.
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