Economics

Hedge Funds Gain As Economy, M&A Accelerate

HFRI Equity Hedge, Special Situations lead November performance; Surge in M&A creating opportunities, speculation across Media, Tech, Telecom

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Leon Cooperman

 

CHICAGO, (December 7, 2017) – Hedge funds extended 2017 gains through November, driven by ongoing U.S. economic growth and significant merger and acquisition (M&A) activity, according to data released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.

The HFRI Fund Weighted Composite Index® gained +0.5 percent in November, led by Equity Hedge and Special Situations funds, marking the 13th consecutive monthly advance and bringing YTD performance to +7.5 percent. The gain extends the record Index Value for the HFRI to 13,926.

Equity Hedge (EH) funds led all main strategies in November as the HFRI Equity Hedge (Total) Index advanced +1.1 percent, bringing YTD performance to +12.1 percent. EH sub-strategy performance was led by the HFRI EH: Healthcare Index, which climbed +2.1 percent for the month and leads all EH sub-strategies YTD with a +17.9 percent return. The HFRI EH: Quantitative Directional Index and HFRI EH: Fundamental Value Indices also produced strong November returns, adding +1.5 and +1.2 percent, respectively. In addition to M&A, EH strategies have also recently increased exposures to ESG factors, which is expected to continue into 2018.

Event-Driven (ED) hedge funds advanced as corporate M&A activity accelerated through November and into December with large transactions at various stages of completion. These include AT&T/Time Warner, Qualcomm/Broadcom, and CVS/Aetna, with additional speculative activity involving 20th Century Fox, Google, Amazon, Facebook, Apple, Nvidia, Disney, Comcast and General Electric. The HFRI Event-Driven (Total) Index advanced +0.1 percent for November, bringing YTD performance to +6.1 percent. ED sub-strategy performance was led by the HFRI ED: Special Situations Index, which jumped +1.5 percent for the month, extending YTD performance to +10.8 percent, leading ED sub-strategies for 2017. The HFRI ED: Credit Arbitrage Index added +0.3 percent in November, bringing the YTD return to +6.0 percent.

Fixed income-based Relative Value Arbitrage (RVA) and Macro strategies posted mixed performance for the month, with the HFRI Relative Value (Total) Index up +0.05 percent, while the HFRI Macro (Total) Index declined -0.2 percent. The HFRI RV: Volatility Index led RVA sub-strategy performance in November, gaining +0.8 percent, while the HFRI RV: Sovereign Index advanced +0.5 percent. Currency and Commodity exposures both detracted from Macro performance for the month, as the HFRI Currency Index fell -1.5 percent and the HFRI Commodity Index declined -0.3 percent. Risk Parity funds also gained in November, with the HFR Risk Parity Vol 10 Index gaining +0.6 percent for the month, bringing YTD performance to +11.9 percent.

"Hedge funds gained in November as M&A activity accelerated with investors and managers positioning for transformative impacts across retail, media, manufacturing, distribution and financial industries," stated Kenneth J. Heinz, President of HFR. "Performance was also driven by positive developments regarding US tax reform, as well as improving expectations for near-term economic growth and optimism for additional strength into 2018. It is likely that these favorable trends will continue to drive industry growth through year end."

Comments reference Flash Update performance figures as posted on December 7, 2017.

Total Return 1 Year3 Year Annualized
HFRI INDICESNovember 2017YTD1 YR3 YRSTD*ShR**RORSTD*ShR***
RORIndex Value
HFRI Fund Weighted Composite Index0.47%13926.467.55%8.63%11.86%1.20%6.183.81%3.69%0.92
HFRI Asset Weighted Composite Index-0.06%1383.646.07%7.29%8.92%1.85%3.352.89%3.26%0.77
Equity Hedge
HFRI Equity Hedge (Total) Index1.07%21032.5512.06%12.99%16.63%1.45%7.875.26%5.64%0.87
HFRI EH: Equity Market Neutral Index0.44%5535.204.40%5.02%11.48%1.66%2.433.69%1.76%1.85
HFRI EH: Fundamental Growth Index1.04%1221.0416.97%17.37%16.51%2.28%6.715.23%7.33%0.68
HFRI EH: Fundamental Value Index1.24%1512.1211.88%13.40%18.22%1.94%6.085.74%6.39%0.84
HFRI EH: Multi-Strategy Index1.06%1374.799.46%10.70%14.64%1.02%9.114.66%5.59%0.77
HFRI EH: Quantitative Directional1.48%18228.3311.39%12.93%18.12%1.76%6.455.71%4.19%1.25
HFRI EH: Sector - Energy/Basic Materials Index0.21%12021.95-5.77%-4.48%-5.09%7.71%-0.67-1.73%10.30%-0.16
HFRI EH: Sector - Healthcare Index2.08%2523.0517.86%17.16%23.55%6.45%2.367.30%11.68%0.63
HFRI EH: Sector - Technology Index0.45%1702.4516.02%15.58%28.68%3.36%4.088.77%5.52%1.48
HFRI EH: Sector - Technology/Healthcare (Total) Index1.30%31089.3417.08%16.51%27.16%2.86%5.098.34%7.63%1.04
HFRI EH: Short Bias Index-0.98%615.65-10.03%-9.70%-10.26%3.86%-2.84-3.55%7.13%-0.53
HFRI Equity Hedge (Total) Index - Asset Weighted-0.04%1332.2610.95%11.67%14.93%1.74%5.874.75%5.38%0.82
Event Driven
HFRI Event-Driven (Total) Index0.12%15914.476.10%7.91%12.84%1.89%3.584.11%4.71%0.79
HFRI ED: Activist Index-1.02%1334.774.02%6.61%19.13%4.44%1.266.01%8.74%0.67
HFRI ED: Credit Arbitrage Index0.30%1580.595.97%7.10%11.15%1.70%3.543.59%4.29%0.75
HFRI ED: Distressed/Restructuring Index-0.21%16746.174.48%7.36%9.11%3.16%1.992.95%5.40%0.49
HFRI ED: Merger Arbitrage Index-0.82%7819.053.75%5.01%11.49%2.08%1.943.69%2.32%1.40
HFRI ED: Multi-Strategy Index-0.04%1357.352.16%3.56%6.99%3.11%0.852.28%4.25%0.46
HFRI ED: Special Situations Index1.51%1626.0310.83%12.18%18.90%2.08%5.135.94%6.08%0.92
HFRI Event Driven (Total) Index - Asset Weighted-0.93%1505.676.97%8.15%6.39%2.81%2.492.09%5.80%0.32
Macro
HFRI Macro (Total) Index-0.24%14877.961.60%2.51%1.60%2.93%0.560.53%3.87%0.05
HFRI Macro: Active Trading Index-1.80%1216.41-1.17%-0.57%2.99%2.94%-0.480.99%3.44%0.19
HFRI Macro: Commodity Index-0.30%1194.95-1.23%-0.69%1.73%2.14%-0.730.57%2.62%0.08
HFRI Macro: Currency Index-1.45%1125.124.57%4.79%7.69%4.00%0.972.50%3.17%0.67
HFRI Macro: Discretionary Thematic Index-0.41%1037.731.03%2.09%0.21%1.28%0.930.07%2.43%-0.12
HFRI Macro: Multi-Strategy Index0.01%1280.764.04%5.05%6.31%1.99%2.042.06%3.54%0.48
HFRI Macro: Systematic Diversified Index-0.03%11553.891.23%2.31%-1.40%5.49%0.28-0.47%6.92%-0.09
HFRI Macro (Total) Index - Asset Weighted-0.01%1392.563.67%5.24%5.32%3.49%1.231.74%4.31%0.33
Relative Value
HFRI Relative Value (Total) Index0.05%11774.374.42%5.65%11.57%1.44%3.213.72%2.82%1.17
HFRI RV: Fixed Income-Asset Backed0.12%8841.067.13%7.67%15.22%0.94%6.974.84%2.10%2.08
HFRI RV: Fixed Income-Convertible Arbitrage Index-0.03%8530.985.47%6.36%16.48%1.32%4.035.22%2.92%1.62
HFRI RV: Fixed Income-Corporate Index-0.44%7226.765.26%7.07%13.76%2.13%2.804.39%3.75%1.06
HFRI RV: Fixed Income-Sovereign Index0.47%1511.404.97%6.11%10.97%1.67%3.043.53%2.57%1.21
HFRI RV: Multi-Strategy Index-0.37%7956.323.08%4.33%10.23%1.59%2.123.30%2.35%1.22
HFRI RV: Volatility Index0.82%1518.195.31%6.08%15.56%1.16%4.354.94%3.18%1.41
HFRI RV: Yield Alternatives Index-0.37%5307.47-3.48%-0.73%-6.00%6.75%-0.21-2.04%10.48%-0.18
HFRI Relative Value (Total) Index - Asset Weighted0.04%1547.274.39%5.55%11.19%1.22%3.703.60%2.17%1.46
Fund of Funds
HFRI Fund of Funds Composite Index0.11%6088.766.97%7.92%7.62%1.35%5.012.48%3.28%0.64
HFRI FOF: Conservative Index0.13%4805.763.96%4.79%6.76%0.99%3.862.20%2.07%0.87
HFRI FOF: Diversified Index0.10%5503.856.13%7.31%6.71%1.59%3.912.19%3.01%0.60
HFRI FOF: Market Defensive Index-0.26%6046.931.40%2.18%2.63%2.76%0.470.87%3.63%0.15
HFRI FOF: Strategic Index0.25%10076.7510.07%10.78%9.84%1.50%6.253.18%4.81%0.59
Regional
HFRI Emerging Markets (Total) Index0.66%18620.2417.55%17.78%18.76%2.79%5.605.90%8.24%0.69
HFRI Emerging Markets: Asia ex-Japan Index1.15%12214.6826.40%24.00%28.57%4.89%4.288.74%11.10%0.78
HFRI Emerging Markets: China Index0.88%1627.2029.15%25.42%33.95%6.12%3.6210.23%14.52%0.72
HFRI Emerging Markets: Global Index0.53%12436.4411.72%12.56%12.59%1.75%6.314.03%5.04%0.73
HFRI Emerging Markets: India Index1.92%1086.8629.98%28.90%35.80%8.32%3.0110.74%14.55%0.75
HFRI Emerging Markets: Latin America Index-1.08%18246.3014.58%15.89%10.43%7.85%1.813.36%13.76%0.28
HFRI Emerging Markets: MENA Index1.45%1224.358.55%10.21%-5.34%5.38%1.67-1.81%7.01%-0.28
HFRI Emerging Markets: Russia/Eastern Europe Index0.52%15545.268.88%14.64%33.13%8.17%1.6110.01%11.94%0.83
HFRI Asia with Japan Index-0.46%1329.188.86%8.69%15.22%2.18%3.444.84%4.73%0.94
HFRI Japan Index1.35%1587.3415.04%15.89%26.34%2.04%6.848.11%5.73%1.32
HFRI North America Index0.92%1499.576.77%8.14%13.43%1.88%3.704.29%4.60%0.85
HFRI Western/Pan Europe Index-0.26%1438.347.45%9.08%11.63%1.74%4.503.74%3.54%0.94
HFRI World Index0.11%1305.614.87%5.95%7.49%1.75%2.812.44%2.89%0.71
FX-Hedged
HFRI Fund Weighted Composite Index - CHF0.92%9654.575.97%6.77%6.43%1.22%4.652.10%3.67%0.47
HFRI Fund Weighted Composite Index - EUR0.30%3044.165.68%6.56%7.90%1.18%4.672.57%3.61%0.61
HFRI Fund Weighted Composite Index - GBP0.38%19925.386.45%7.41%10.18%1.19%5.293.29%3.66%0.79
HFRI Fund Weighted Composite Index - JPY0.34%7577.045.97%6.84%8.30%1.14%5.042.69%3.63%0.64
Thematic
HFRI Credit Index-0.17%1600.664.85%6.25%12.14%1.55%3.363.89%3.00%1.16
HFRI Diversity Index0.40%1726.448.38%9.69%13.39%1.53%5.494.28%4.04%0.96
HFRI Women Index-0.55%1688.238.35%9.25%8.84%2.32%3.462.87%4.39%0.57

Article by Hedge Fund Research