Economics

A Perfect 2017 For Hedge Funds?

HFR Blockchain, Cryptocurrency, Risk Parity Indices surge; Event-Driven leads HFRI into 2018 as M&A, Special Situations accelerate

CHICAGO, (January 8, 2018) – Hedge funds gained in December to end 2017 with positive returns in every month, the first perfect calendar year since 2003. The HFRI Fund Weighted Composite Index® climbed +0.9 percent in December, topping the monthly performance of most equity markets, including the Nasdaq, Russell 2000, Nikkei 225, Shanghai Composite and France’s CAC 40.

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The advance brings the FY 2017 performance to a gain of +8.5 percent, the best calendar year performance since 2013, extending the record Index Value to 14,054, according to data released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry. Inclusive of gains in late 2016, the HFRI has advanced in 21 of the trailing 22 months, including each of the last 14 months.

Event-Driven (ED) and Equity Hedge (EH) funds led industry performance, driven in part by an improving M&A environment in Technology, Media, Healthcare, Retail and Manufacturing, as well as expectations for now-enacted comprehensive US tax reform. The HFRI Event-Driven (Total) Index advanced +1.1 percent in December, the best monthly return since January 2017, and brought the FY17 gain to +7.3 percent. ED performance was led by the HFRI ED: Distressed/Restructuring Index, the ED: Multi-Strategy Index, and the ED: Special Situations Index, each of which advanced +1.7 percent, respectively, in December. For the FY17, the HFRI Event-Driven Index (Asset Weighted) advanced +8.2 percent, topping the equally-weighted composite by 90 basis points.

The HFRI Equity Hedge (Total) Index climbed +1.0 percent for the month, bringing FY17 performance to a gain of +13.2 percent, the strongest calendar year since the Index returned +14.3 percent in 2013. EH sub-strategy performance in December was led the HFRI EH: Fundamental Growth Index, which was up +1.6 percent, bringing the FY17 return to +18.9 percent, surging past the HFRI EH: Healthcare Index to lead all EH strategies for 2017. The HFRI EH: Fundamental Value Index advanced +1.3 percent for the month and +13.3 percent for the year.

Risk Parity strategies also posted strong gains in 2017, with the HFR Risk Parity Vol 15 Index gaining +2.25 percent in December, bringing the YTD gain to +20.1 percent. Similarly, the HFR Risk Parity Vol 10 Institutional Index gained +1.6 percent in December and +13.5 percent for FY17. HFR launched the Risk Parity family of Indices in August (read here).

The newly-launched HFR Blockchain Index continued its meteoric surge with a gain of +88.5 percent in December, bringing the FY 17 parabolic return to +2,961 percent. HFR launched the HFR Blockchain and Cryptocurrency Indices in December (read here).

Fixed income-based Relative Value Arbitrage (RVA) and Macro hedge funds also had positive returns to conclude 2017, with the HFRI Relative Value (Total) Index gaining +0.8 percent, while the HFRI Macro (Total) Index added +0.7 percent for the month. RVA sub-strategy performance was led by the HFRI RV: Yield Alternatives Index, which climbed +3.3 percent in December. For the year, the HFRI RV: FI-Asset Backed Index led sub-strategy performance with a gain of +7.6 percent. December performance of the HFRI Macro Index was led by multi-strategy funds, as the HFRI Macro: Multi-Strategy Index advanced +1.0 percent. For the year, Macro sub-strategy performance was led by both the HFRI Macro: Multi-Strategy Index and the HFR Macro: Currency Index, both of which gained +5.5 percent, respectively.

“Hedge funds successfully concluded 2017 with positive HFRI performance in every month, extended the record HFRI Index Value and increased the record total industry assets throughout the year, as the US economy accelerated, global equities expanded to record levels, and investor tolerance improved,” stated Kenneth J. Heinz, President of HFR. “The powerful combination of surging global equity markets, dynamic M&A trends, commodity volatility and divergent interest rate cycles has created an exciting opportunity set for hedge funds coming into 2018. Developing opportunities in risk parity, blockchain and cryptocurrency trading, each of which have posted outstanding performance in 2017, are likely to further complement and contribute to record industry growth in 2018.”

Comments reference Flash Update performance figures as posted on January 8, 2018.

Total Return 1 Year3 Year Annualized
HFRI INDICESDecember 201720173 YRSTD*ShR**RORSTD*ShR***
RORIndex Value
HFRI Fund Weighted Composite Index0.90%14053.848.54%13.15%1.15%6.334.20%3.68%1.02
HFRI Asset Weighted Composite Index0.32%1389.206.49%9.44%1.71%3.143.05%3.25%0.81
Equity Hedge
HFRI Equity Hedge (Total) Index1.04%21238.5313.16%18.18%1.41%8.115.73%5.63%0.94
HFRI EH: Equity Market Neutral Index0.25%5555.474.78%11.70%1.66%2.253.76%1.76%1.86
HFRI EH: Fundamental Growth Index1.57%1241.5118.93%20.37%1.98%8.356.38%7.26%0.83
HFRI EH: Fundamental Value Index1.33%1530.8113.26%19.65%1.92%6.036.16%6.40%0.90
HFRI EH: Multi-Strategy Index1.03%1379.419.83%15.09%1.00%8.474.80%5.58%0.79
HFRI EH: Quantitative Directional0.18%18171.0011.04%17.87%1.77%5.405.63%4.15%1.24
HFRI EH: Sector – Energy/Basic Materials Index1.06%12387.42-2.91%-0.46%7.37%-0.50-0.15%10.19%-0.01
HFRI EH: Sector – Healthcare Index-0.16%2505.4417.04%18.46%6.33%2.385.81%11.55%0.51
HFRI EH: Sector – Technology Index-0.34%1686.4614.93%26.69%3.54%3.708.21%5.57%1.37
HFRI EH: Sector – Technology/Healthcare (Total) Index-0.26%30811.8916.03%23.52%2.77%5.077.29%7.60%0.91
HFRI EH: Short Bias Index0.10%614.50-10.20%-10.53%3.80%-3.06-3.64%7.14%-0.55
HFRI Equity Hedge (Total) Index – Asset Weighted0.18%1339.4611.55%15.54%1.68%5.964.93%5.37%0.84
Event Driven
HFRI Event-Driven (Total) Index1.07%16095.117.31%14.43%1.56%3.914.60%4.71%0.89
HFRI ED: Activist Index-0.50%1330.193.66%15.74%3.94%0.694.99%8.66%0.55
HFRI ED: Credit Arbitrage Index0.42%1587.806.46%12.39%1.61%3.313.97%4.26%0.83
HFRI ED: Distressed/Restructuring Index1.67%17150.337.00%13.28%2.32%2.524.24%5.36%0.72
HFRI ED: Merger Arbitrage Index0.35%7844.454.09%11.44%1.90%1.613.68%2.32%1.38
HFRI ED: Multi-Strategy Index1.66%1381.874.01%9.29%3.22%0.943.01%4.31%0.61
HFRI ED: Special Situations Index1.65%1637.6211.62%19.76%2.13%4.756.20%6.08%0.95
HFRI Event Driven (Total) Index – Asset Weighted0.90%1523.338.23%8.29%2.61%2.682.69%5.78%0.41
Macro
HFRI Macro (Total) Index0.66%14973.392.25%2.01%2.86%0.460.67%3.88%0.08
HFRI Macro: Active Trading Index-0.35%1218.70-0.98%2.44%2.56%-0.750.81%3.34%0.13
HFRI Macro: Commodity Index0.47%1203.80-0.49%2.24%2.11%-0.680.74%2.62%0.13
HFRI Macro: Currency Index0.26%1134.685.46%9.58%3.65%1.213.10%2.97%0.89
HFRI Macro: Discretionary Thematic Index-0.67%1022.69-0.44%0.18%1.48%-0.940.06%2.38%-0.15
HFRI Macro: Multi-Strategy Index1.02%1298.275.46%7.84%2.00%2.192.55%3.58%0.60
HFRI Macro: Systematic Diversified Index0.99%11679.022.33%-1.51%5.54%0.27-0.50%6.93%-0.10
HFRI Macro (Total) Index – Asset Weighted0.22%1397.034.00%5.47%3.30%0.921.79%4.31%0.33
Relative Value
HFRI Relative Value (Total) Index0.82%11874.795.31%13.05%1.26%3.354.17%2.80%1.32
HFRI RV: Fixed Income-Asset Backed0.11%8879.267.59%15.39%0.95%6.714.89%2.10%2.08
HFRI RV: Fixed Income-Convertible Arbitrage Index-0.06%8533.635.50%16.23%1.30%3.395.14%2.92%1.58
HFRI RV: Fixed Income-Corporate Index0.92%7328.186.73%16.92%1.54%3.625.35%3.59%1.35
HFRI RV: Fixed Income-Sovereign Index-0.19%1505.054.52%12.12%1.67%2.093.89%2.38%1.44
HFRI RV: Multi-Strategy Index0.90%8046.614.25%11.61%1.31%2.453.73%2.35%1.39
HFRI RV: Volatility Index0.49%1522.105.59%17.00%1.07%4.185.37%3.07%1.58
HFRI RV: Yield Alternatives Index3.26%5456.11-0.78%-2.72%7.02%-0.22-0.92%10.67%-0.08
HFRI Relative Value (Total) Index – Asset Weighted0.45%1553.854.84%11.78%1.00%3.773.78%2.16%1.53
Fund of Funds
HFRI Fund of Funds Composite Index0.90%6132.697.74%8.01%1.41%4.622.60%3.31%0.66
HFRI FOF: Conservative Index0.25%4799.563.83%6.18%1.03%2.732.02%2.07%0.76
HFRI FOF: Diversified Index0.76%5531.636.67%6.96%1.57%3.512.27%3.02%0.61
HFRI FOF: Market Defensive Index1.04%6100.332.30%2.35%2.86%0.470.78%3.62%0.11
HFRI FOF: Strategic Index1.82%10251.5511.98%11.31%1.79%5.833.64%4.89%0.67
Regional
HFRI Emerging Markets (Total) Index2.26%19027.9020.12%24.36%2.60%6.757.54%8.11%0.88
HFRI Emerging Markets: Asia ex-Japan Index2.44%12525.9629.62%31.62%2.75%9.219.59%11.14%0.84
HFRI Emerging Markets: China Index2.10%1655.6031.41%33.68%3.37%7.9310.16%14.52%0.71
HFRI Emerging Markets: Global Index2.21%12671.4113.83%17.93%2.18%5.545.65%4.81%1.08
HFRI Emerging Markets: India Index7.03%1167.2639.59%45.61%8.86%3.7513.34%14.96%0.89
HFRI Emerging Markets: Latin America Index2.58%18630.0716.99%17.68%8.10%1.875.58%13.56%0.43
HFRI Emerging Markets: MENA Index3.04%1255.9411.35%-0.50%5.77%1.73-0.17%7.08%-0.05
HFRI Emerging Markets: Russia/Eastern Europe Index1.40%15729.1710.17%47.62%6.72%1.3313.86%10.46%1.26
HFRI Asia with Japan Index1.18%1353.7210.87%16.94%1.70%5.525.35%4.74%1.03
HFRI Japan Index1.77%1610.7316.74%27.37%2.07%7.088.40%5.76%1.36
HFRI North America Index0.61%1510.367.54%14.16%1.77%3.594.51%4.60%0.89
HFRI Western/Pan Europe Index-0.18%1432.467.01%10.47%1.85%3.173.37%3.55%0.83
HFRI World Index0.86%1316.095.71%8.23%1.68%2.742.67%2.91%0.77
FX-Hedged
HFRI Fund Weighted Composite Index – CHF0.60%9651.585.94%6.70%1.12%4.302.19%3.64%0.49
HFRI Fund Weighted Composite Index – EUR0.67%3064.816.40%8.92%1.11%4.732.89%3.61%0.69
HFRI Fund Weighted Composite Index – GBP0.76%20079.927.27%11.29%1.13%5.393.63%3.65%0.88
HFRI Fund Weighted Composite Index – JPY0.70%7631.426.73%9.41%1.09%5.123.04%3.62%0.73
Thematic
HFRI Credit Index0.82%1619.476.08%13.98%1.17%4.254.46%2.96%1.34
HFRI Diversity Index0.61%1736.869.03%14.51%1.40%5.524.62%4.01%1.04
HFRI Women Index0.15%1703.879.35%9.98%2.09%3.843.22%4.37%0.65