Netixis’ Hedge Funds Trends Monthly Update for November is out. Stocks soared last month as the Nikkei gained 9.3%, the S&P 500 went up 2.5% and Stoxx 600 jumped 0.9%. Natixis analysts Sophie Chardon, Simon Delbos, Karim El Ali and Emilie Tetard said that all hedge fund strategies performed well in November, except short sellers and convertible arbitrage. While HFRI jumped 1%, the Credit Suisse Hedge Fund non-investable index rose 1.3% in November.
CTA the best performing strategy
Commodity Trading Advisers (CTAs) emerged as the best strategy once again. It was up 2.1% in November. CTAs benefited primarily due to their preference for the U.S. equities. However, their December returns may not be great due to tapering and speculation over rising interest rates. Long equity bias returned a solid 1.85% in November, and emerging market strategies gained 1.1%. Emerging strategy managers were hurt by difficulties in emerging forex and equity markets, though they benefited from encouraging trends in Emerging Market Bond Index (EMBI) credit trends.
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Global macro strategies returned 1.03% in November, driven by solid performance of stocks and high yield credit spreads. Most arbitrage strategies gave a positive return in November, except convertible arbitrage, which was down 0.20%. Among others, merger arbitrage returned 0.4%, equity market neutral gained 0.8%, and fixed income arbitrage returned 0.5%. Overall, arbitrage strategies have given only one month of negative return over the past two years.
2014 seems bright for hedge funds
Netixis says that 2014 looks promising for hedge funds. Dispersion between asset classes, limited volatility and and decorrelation between risky assets are all in favor of hedge funds. The analysts are optimistic about arbitrage strategies in particular. They also expect long equity bias strategies to perform well over the next year.
According to Eurekahedge‘s monthly report, hedge funds witnessed a decline in total assets under management in November. Investors pulled out $3.96 billion from the hedge fund industry. As of November, hedge funds have $1.99 trillion of AUM, which is expected to surpass $2 trillion this year. But if the outflow maintains its November pace or increases further, touching the coveted $2 trillion mark will be tough for hedge funds.