Hedge funds were up 0.42%1 in September while underlying markets, as represented by the MSCI AC World Index (Local), gained 2.17% during the month. September was marked by strong performance in US equities on the back of Trump’s tax reform proposal with the S&P 500 ending the month up 1.93% while the DJIA gained 2.08%. US dollar strengthened against a basket of currencies mid-month onwards as expectations for a more aggressive rate hike began to take some root, despite persistently weak inflation. As a result, trading conditions for currencies were also somewhat choppy particularly for the emerging markets currencies against the greenback. Meanwhile, emerging market managers continued to perform well during the month supported by resilient oil and improving outlook for the global economy which are helping to inject some investor optimism. Key trading themes during the month puts a spotlight on currencies, commodities and bonds which led to a drag on hedge fund performance.
Among regional mandates, Japanese hedge funds managers topped the table this month with gains of1.72% and among strategic mandates, long/short equity hedge funds topped the table and was up 1.46% followed by event driven hedge funds which gained 0.80% during the month. On a year-to-date basis, hedge funds were up 5.53% while underlying markets grew 11.97%.
Figure 1: September 2017 and August 2017 returns across regions
All regional mandates ended the month of September in the green, with Japan mandated hedge funds posting the strongest gains, up 1.71% during the month and 8.83% year-to-date. Asia ex-Japan hedge funds were up 1.25% during the month, with Greater China mandates up 2.15% while India dedicated hedge funds were down 0.76% with the INR posting a steep decline against the US dollar during the month. Latin America focused hedge funds also posted strong gains with 1.15% followed North American and Europe mandated hedge fund which were up 1.08% and 0.84% respectively, with gains from equity hedged strategies being depressed by losses emanating from managed futures and FX trend following strategies.
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