Hedge funds posted their fourth consecutive month of gains this year, up 0.54%1 during the month of April. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) were up 1.17% over the same period. The Macron vs. Le Pen run-up to the French presidential election provided some relief for the markets especially for European equities as expectations for a Macron victory in the second round seemed likely. In the Eurozone and elsewhere in the world, economic data for Q1 2017 was largely encouraging with indicators pointing towards global economic expansion.
Among regional mandates, Asia ex-Japan mandated hedge funds topped the table for the month, gaining 1.18%, followed by emerging markets and Latin American-focused hedge funds with gains of 1.10% each. Latin American equities were modest in April, with the Mexican IPC Index gaining 1.48% while the Brazilian Ibovespa Index was up 0.48% over the same period. The renegotiations of the NAFTA deal by the Trump administration proved to be a relief for the three countries in the agreement, which would otherwise have seen the NAFTA being abolished. However, much remains to be seen as the extent of renegotiations remains a big question mark. Hedge fund managers allocating into developed mandates were also in positive territory this month with European managers gaining 0.99% while North American and Japanese counterparts were up 0.78% and 0.49% respectively.
On a year to-date basis, hedge funds are up 2.90% while underlying markets gained 6.29%. Latin American hedge fund managers led the table up 7.54% followed by their Asia ex-Japan and emerging markets counterparts with gains of 7.01% and 6.83% respectively.
Below are the key highlights for the month of April 2017:
- Hedge funds gained 0.54% in April with underlying markets as represented by the MSCI AC World Index (Local) up 1.17% over the same period. On a year-to-date basis, managers gained 2.90% while underlying markets were up 6.29%.
- Among developed mandates, European hedge funds were up 0.99%, followed by North American and Japanese peers with 0.78% and 0.49% respectively. On a year-to-date basis, European managers were up 3.30% followed by North American and Japanese managers who posted gains of 2.75% and 2.14% respectively.
- CTA/managed futures hedge fund managers retracted 0.21% in April with underlying commodity-focused hedge funds leading much of the weakness, down 1.62% for the month. On a year-to-date basis, CTA/managed futures hedge fund managers declined 0.76% with commodity-focused hedge funds retracting 1.27%.
- Emerging market mandates gained 1.10% for the month with strength led by underlying Asia ex-Japan and Latin American mandates. Frontier markets, as represented by the Eurekahedge Frontier Markets Hedge Fund Index is up 1.39% for the month.
- The Eurekahedge Long Short Equities Hedge Fund Index gained 0.93% during the month with strength led by underlying equity long-bias hedge funds which gained 1.25% over the same period. On a year-to-date basis, long/short equities hedge fund managers gained 4.68% with underlying equity long bias hedge fund managers at 6.79% YTD.
- Asia ex-Japan mandated hedge funds outshone regional peers, gaining 1.18% during the month. Underlying Greater China and India hedge fund managers were up 0.83% and 3.45% over the same period respectively. On a year-to-date basis, Greater China and India mandated hedge funds posted impressive gains, up 8.60% and 14.62% respectively.
- Among volatility-focused hedge funds, short volatility hedge funds topped the table for April, gaining 1.13% while long-volatility hedge funds posted the steepest decline, down 1.25%. On a year-to-date basis, short volatility hedge funds gained 4.71% while tail risk hedge funds were down 5.73%.
|Main Indices||Apr 20171||Last 3 Months||2017 Returns||2016 Returns||Annualised Returns||Constituents||Weighting|
|Eurekahedge Hedge Fund Index||0.54||2.02||2.90||4.51||8.89%||2,759||Equal|
|Eurekahedge North American Hedge Fund Index||0.78||1.78||2.75||7.96||9.61%||626||Equal|
|Eurekahedge European Hedge Fund Index||0.99||2.52||3.30||0.16||7.27%||304||Equal|
|Index of the Month||Apr 20171||Last 3 Months||2017 Returns||2016 Returns||Annualised Returns||Constituents||Weighting|
|CBOE Short Volatility Hedge Fund Index||1.13||3.25||4.71||5.09||8.93%||13||Equal|
|Eurekahedge Main Indices||Apr 20171||2017 Returns||2016 Returns|
|Eurekahedge Hedge Fund Index||0.54||2.90||4.51|
|Eurekahedge Fund of Funds Index||0.38||2.45||-0.11|
|Eurekahedge Long-only Absolute Return Fund Index||1.30||8.02||7.66|
|Eurekahedge Islamic Fund Index||0.55||3.77||4.42|
All regional mandates were positive across the board, with Asia ex-Japan hedge fund managers posting gains of 1.18%, with performance propped up by underlying Indian hedge fund managers who saw gains of 3.45% for the month. Underlying Greater China focused hedge funds were also up this month, gaining 0.83%. Latin American and emerging markets mandated hedge funds followed behind, gaining 1.10% during the month with performance backed by modest gains of underlying equity markets. The Ibovespa Index and the Mexican IPC Index were up 0.65% and 1.48% respectively this month as the reassurance that the US will remain in the NAFTA deal provided some form of relief. However, emerging markets still remain rather volatile to the outcomes of renegotiations of the NAFTA deal, given Trumpâ€™s protectionist rhetoric. That being said, with his proposed reforms in home ground still rather shaky, the NAFTA deal could perhaps take a backseat for the moment. European and North American hedge fund managers were also up this month, gaining 0.99% and 0.78% respectively. Equity performance in developed markets showed fair strength, with European equities posting a relief rally at the outcome of the first round of the French presidential elections. The CAC Index ended the month up 2.83% and the DAX Index was up 1.02% over the same period. The US equity markets were also up this month, with the S&P 500 Index gaining 0.91%. Over in Japan, managers were up 0.49% for the month, with the Nikkei 225 Index gaining 1.52% on the back of a weaker Yen.
On a year-to-date basis, Latin American hedge fund managers topped the tables, and were up 7.54%, followed by Asia ex-Japan and emerging market managers with gains of 7.01% and 6.83% respectively. European hedge fund managers were up 3.30% followed by North American and Japan managers with gains of 2.75% and 2.14% respectively.Â
|Eurekahedge Regional Indices||Apr 20171||2017 Returns||2016 Returns|
|Eurekahedge North American Hedge Fund Index||0.78||2.75||7.96|
|Eurekahedge European Hedge Fund Index||0.99||3.30||0.16|
|Eurekahedge Eastern Europe & Russia Hedge Fund Index||2.39||6.60||22.27|
|Eurekahedge Japan Hedge Fund Index||0.49||2.14||0.98|
|Eurekahedge Emerging Markets Hedge Fund Index||1.10||6.83||7.30|
|Eurekahedge Asia ex Japan Hedge Fund Index||1.18||7.01||-0.53|
|Eurekahedge Latin American Hedge Fund Index||1.10||7.54||18.77|
Performance across strategic mandates were a mixed bag this month with CTA/managed futures and macro mandated hedge funds languishing into negative territory, down 0.21% and 0.16% respectively. Underlying commodity focused hedge funds led much of the weakness in CTA/managed futures this month, down 1.62% as commodity markets were rather choppy. Potential extensions to the OPEC production cut lead to a rebound in crude oil prices, however the news of rising US inventory affected much of the outlook on the oil industry. Base metals headed on a downtrend with the S&P GSCI Industrial Metals ending the month with a decline of 3.08%. On the other hand, precious metals ended the month stronger with performance supported by gold. Underlying trend-following and FX-focused hedge funds were up this month, gaining a modest 0.24% and 0.40% respectively. The greenback declined during the month with the US Dollar Index down 1.30% as expectations on Trumpâ€™s fiscal and tax stimulus started to wan. At the same time, developments in European politics also strengthened the Euro and pound against the greenback whereas the Japanese yen slightly weakened against the dollar.
On the other hand, distressed debt hedge funds posted the best gains for the month, up 1.61%, outperforming the U.S high yield market which gained 1.10%. Event driven and multi-strategy hedge fund managers followed with gains of 1.30% and 1.05% respectively. Long/short equities hedge fund managers posted gains of 0.93% on the back of encouraging Q1 2017 economic data and positive performing global equity markets which were largely positive across the board. The performance of underlying long/short equities sub-strategies were positive across the board with equity long bias managers posting the best gains for the month, up 1.25%. Equity market neutral and equity short bias managers posted gains this month, up 0.74% and 0.41% respectively. Arbitrage and fixed income mandated hedge funds were also up, gaining 0.73% and 0.65% respectively while relative value hedge fund managers posted a modest 0.10% for the month with performance led by underlying relative value volatility strategy (+1.05%). Among volatility-focused hedge funds, short volatility hedge fund managers topped the tables with gains of 1.13% in April whereas long volatility hedge fund managers posted the steepest decline, down 1.25% as volatility levels, represented by the CBOE VIX Index, fell towards month-end.
On a year-to-date basis, event driven hedge fund managers were up 4.81% followed by long/short equities hedge fund managers which gained 4.68%. Multi-strategy managers were up 4.45% followed by distressed debt managers which were up 3.90% respectively. On the other hand, CTA/managed futures hedge fund managers were down 0.76% with weakness lead by underlying commodity-focused and trend-following strategies, declining 1.27% and 0.74% year-to-date respectively.
Looking at the full list of Eurekahedge Strategy Indices in Table 1 below, equity long-bias and event driven managers feature strongly on a 2017 year-to-date basis, with gains of 6.79% and 4.81% respectively while at the other end of the spectrum, tail risk volatility and long volatility managers posted the steepest year-to-date losses, down 5.73% and 5.52% respectively.
Table 1: Index Flash Strategy Return Map
|Eurekahedge Strategy Indices||Apr 20171||2017 Returns||2016 Returns|
|Eurekahedge Arbitrage Hedge Fund Index||0.73||2.02||4.78|
|Eurekahedge CTA/Managed Futures Hedge Fund Index||-0.21||-0.76||1.52|
|Eurekahedge Distressed Debt Hedge Fund Index||1.61||3.90||13.10|
|Eurekahedge Event Driven Hedge Fund Index||1.30||4.81||10.23|
|Eurekahedge Fixed Income Hedge Fund Index||0.65||2.99||6.60|
|Eurekahedge Long Short Equities Hedge Fund Index||0.93||4.68||3.94|
|Eurekahedge Macro Hedge Fund Index||-0.16||0.90||3.41|
|Eurekahedge Multi-Strategy Hedge Fund Index||1.05||4.45||4.78|
|Eurekahedge Relative Value Hedge Fund Index||0.10||2.08||7.22|
|CBOE Eurekahedge Long Volatility Hedge Fund Index||-1.25||-5.52||-2.82|
|CBOE Eurekahedge Relative Value Volatility Hedge Fund Index||1.05||2.49||7.44|
|CBOE Eurekahedge Short Volatility Hedge Fund Index||1.13||4.71||5.09|
|CBOE Eurekahedge Tail Risk Hedge Fund Index||-0.43||-5.73||-11.81|
|Eurekahedge Equity Long Bias Hedge Fund Index||1.25||6.79||5.31|
|Eurekahedge Equity Market Neutral Hedge Fund Index||0.74||1.54||-0.53|
|Eurekahedge Equity Short Bias Hedge Fund Index||0.41||-5.07||-7.35|
|Eurekahedge Trend Following Index||0.24||-0.74||-1.01|
|Eurekahedge FX Hedge Fund Index||0.40||1.29||0.90|
|Eurekahedge Commodity Hedge Fund Index||-1.62||-1.27||7.00|
|Eurekahedge Global Hedge Fund Indices by Fund Size||Apr 20171||2017 Returns||2016 Returns|
|Eurekahedge Small Hedge Fund Index (< US$100m)||0.58||2.97||4.83|
|Eurekahedge Medium Hedge Fund Index (US$100m – US$500m)||0.69||3.01||4.29|
|Eurekahedge Large Hedge Fund Index (> US$500m)||0.28||2.05||2.71|
|Eurekahedge Billion Dollar Hedge Fund Index||-0.12||1.49||2.39|
|Mizuho-Eurekahedge Indices||Apr 20171||2017 Returns||2016 Returns|
|Mizuho-Eurekahedge Index – USD||0.41||2.26||0.72|
|Mizuho-Eurekahedge TOP 100 Index – USD||-0.08||1.10||0.25|
|Mizuho-Eurekahedge TOP 300 Index – USD||0.21||1.73||0.24|
|Asia-Eurekahedge Indices||Apr 20171||2017 Returns||2016 Returns|
|Eurekahedge Greater China Hedge Fund Index||0.83||8.60||-4.64|
|Eurekahedge India Hedge Fund Index||3.45||14.62||3.19|
1 Based on 33.67% of funds which have reported April 2017 returns as at 9 May 2017
2 Bank of America Merrill Lynch US High Yield Master II Index
Article by Eurekahedge