Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index was up 3.41%1 in December 2020, bringing its 2020 return to 11.68% - its strongest annual performance in over a decade. The underlying global equity market as represented by MSCI ACWI2 gained 4.04% over the same month. Global hedge funds benefitted from the strong rally of risk assets during the month driven by the deployment of several COVID-19 vaccines and the passage of the new COVID-19 relief bill in the US, which was the second-largest economic stimulus in American history. In the US, NASDAQ Composite was up 5.65% in December, bringing its 2020 return to 43.64% compared to 19.30% of the S&P 500. The tech-companies particularly the FAANG group strongly benefitted from the ongoing pandemic as seen from the 80.75% return of AAPL throughout the year. In the same vein, the post-Brexit trade agreement between the UK and EU boosted the performance of the equity market in the region, with the DAX gaining 3.22% during the month, while the FTSE100 returned 3.10% over the same period respectively. Returns were mostly positive across geographic mandates in December. Fund managers focusing in North America were up 3.68%, outperforming their Asia ex-Japan and European peers who returned 3.56% and 2.14% respectively. Across strategies, long/short equities, CTA/managed futures and event driven hedge fund managers were up 4.08%, 4.05% and 3.41% respectively throughout the month.

Roughly 87.2% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in December, and 31.0% of the hedge fund managers in the database were able to maintain double-digit returns in throughout in 2020.

Figure 1: December 2020 and November 2020 returns across regions

Figure 2 illustrates the 2020 performance of hedge fund managers across regions. Despite the sharp sell-off in the first quarter of 2020 which was the worst quarterly performance for global hedge funds since inception due to the spread of COVID-19. All regions have recovered from their deep losses as the global equity market exhibited a strong rebound since the second quarter of the year, supported by the easing economic policies, encouraging progress of vaccine development and positive geopolitical development. On the other hand, Japanese hedge funds lagged the group as they returned 0.59%, broadly underperforming the global hedge funds which gain 11.68% as represented by the Eurekahedge Hedge Fund Index.

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1Based on 47.41% of funds which have reported December 2020 returns as at 14 January 2021
22 MSCI ACWI (Local)