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 Year 3 Year Annualized
HFRI INDICES December 2017 2017 3 YR STD* ShR** ROR STD* ShR***
ROR Index Value
HFRI Fund Weighted Composite Index 0.90% 14053.84 8.54% 13.15% 1.15% 6.33 4.20% 3.68% 1.02
HFRI Asset Weighted Composite Index 0.32% 1389.20 6.49% 9.44% 1.71% 3.14 3.05% 3.25% 0.81
Equity Hedge
HFRI Equity Hedge (Total) Index 1.04% 21238.53 13.16% 18.18% 1.41% 8.11 5.73% 5.63% 0.94
HFRI EH: Equity Market Neutral Index 0.25% 5555.47 4.78% 11.70% 1.66% 2.25 3.76% 1.76% 1.86
HFRI EH: Fundamental Growth Index 1.57% 1241.51 18.93% 20.37% 1.98% 8.35 6.38% 7.26% 0.83
HFRI EH: Fundamental Value Index 1.33% 1530.81 13.26% 19.65% 1.92% 6.03 6.16% 6.40% 0.90
HFRI EH: Multi-Strategy Index 1.03% 1379.41 9.83% 15.09% 1.00% 8.47 4.80% 5.58% 0.79
HFRI EH: Quantitative Directional 0.18% 18171.00 11.04% 17.87% 1.77% 5.40 5.63% 4.15% 1.24
HFRI EH: Sector – Energy/Basic Materials Index 1.06% 12387.42 -2.91% -0.46% 7.37% -0.50 -0.15% 10.19% -0.01
HFRI EH: Sector – Healthcare Index -0.16% 2505.44 17.04% 18.46% 6.33% 2.38 5.81% 11.55% 0.51
HFRI EH: Sector – Technology Index -0.34% 1686.46 14.93% 26.69% 3.54% 3.70 8.21% 5.57% 1.37
HFRI EH: Sector – Technology/Healthcare (Total) Index -0.26% 30811.89 16.03% 23.52% 2.77% 5.07 7.29% 7.60% 0.91
HFRI EH: Short Bias Index 0.10% 614.50 -10.20% -10.53% 3.80% -3.06 -3.64% 7.14% -0.55
HFRI Equity Hedge (Total) Index – Asset Weighted 0.18% 1339.46 11.55% 15.54% 1.68% 5.96 4.93% 5.37% 0.84
Event Driven
HFRI Event-Driven (Total) Index 1.07% 16095.11 7.31% 14.43% 1.56% 3.91 4.60% 4.71% 0.89
HFRI ED: Activist Index -0.50% 1330.19 3.66% 15.74% 3.94% 0.69 4.99% 8.66% 0.55
HFRI ED: Credit Arbitrage Index 0.42% 1587.80 6.46% 12.39% 1.61% 3.31 3.97% 4.26% 0.83
HFRI ED: Distressed/Restructuring Index 1.67% 17150.33 7.00% 13.28% 2.32% 2.52 4.24% 5.36% 0.72
HFRI ED: Merger Arbitrage Index 0.35% 7844.45 4.09% 11.44% 1.90% 1.61 3.68% 2.32% 1.38
HFRI ED: Multi-Strategy Index 1.66% 1381.87 4.01% 9.29% 3.22% 0.94 3.01% 4.31% 0.61
HFRI ED: Special Situations Index 1.65% 1637.62 11.62% 19.76% 2.13% 4.75 6.20% 6.08% 0.95
HFRI Event Driven (Total) Index – Asset Weighted 0.90% 1523.33 8.23% 8.29% 2.61% 2.68 2.69% 5.78% 0.41
Macro
HFRI Macro (Total) Index 0.66% 14973.39 2.25% 2.01% 2.86% 0.46 0.67% 3.88% 0.08
HFRI Macro: Active Trading Index -0.35% 1218.70 -0.98% 2.44% 2.56% -0.75 0.81% 3.34% 0.13
HFRI Macro: Commodity Index 0.47% 1203.80 -0.49% 2.24% 2.11% -0.68 0.74% 2.62% 0.13
HFRI Macro: Currency Index 0.26% 1134.68 5.46% 9.58% 3.65% 1.21 3.10% 2.97% 0.89
HFRI Macro: Discretionary Thematic Index -0.67% 1022.69 -0.44% 0.18% 1.48% -0.94 0.06% 2.38% -0.15
HFRI Macro: Multi-Strategy Index 1.02% 1298.27 5.46% 7.84% 2.00% 2.19 2.55% 3.58% 0.60
HFRI Macro: Systematic Diversified Index 0.99% 11679.02 2.33% -1.51% 5.54% 0.27 -0.50% 6.93% -0.10
HFRI Macro (Total) Index – Asset Weighted 0.22% 1397.03 4.00% 5.47% 3.30% 0.92 1.79% 4.31% 0.33
Relative Value
HFRI Relative Value (Total) Index 0.82% 11874.79 5.31% 13.05% 1.26% 3.35 4.17% 2.80% 1.32
HFRI RV: Fixed Income-Asset Backed 0.11% 8879.26 7.59% 15.39% 0.95% 6.71 4.89% 2.10% 2.08
HFRI RV: Fixed Income-Convertible Arbitrage Index -0.06% 8533.63 5.50% 16.23% 1.30% 3.39 5.14% 2.92% 1.58
HFRI RV: Fixed Income-Corporate Index 0.92% 7328.18 6.73% 16.92% 1.54% 3.62 5.35% 3.59% 1.35
HFRI RV: Fixed Income-Sovereign Index -0.19% 1505.05 4.52% 12.12% 1.67% 2.09 3.89% 2.38% 1.44
HFRI RV: Multi-Strategy Index 0.90% 8046.61 4.25% 11.61% 1.31% 2.45 3.73% 2.35% 1.39
HFRI RV: Volatility Index 0.49% 1522.10 5.59% 17.00% 1.07% 4.18 5.37% 3.07% 1.58
HFRI RV: Yield Alternatives Index 3.26% 5456.11 -0.78% -2.72% 7.02% -0.22 -0.92% 10.67% -0.08
HFRI Relative Value (Total) Index – Asset Weighted 0.45% 1553.85 4.84% 11.78% 1.00% 3.77 3.78% 2.16% 1.53
Fund of Funds
HFRI Fund of Funds Composite Index 0.90% 6132.69 7.74% 8.01% 1.41% 4.62 2.60% 3.31% 0.66
HFRI FOF: Conservative Index 0.25% 4799.56 3.83% 6.18% 1.03% 2.73 2.02% 2.07% 0.76
HFRI FOF: Diversified Index 0.76% 5531.63 6.67% 6.96% 1.57% 3.51 2.27% 3.02% 0.61
HFRI FOF: Market Defensive Index 1.04% 6100.33 2.30% 2.35% 2.86% 0.47 0.78% 3.62% 0.11
HFRI FOF: Strategic Index 1.82% 10251.55 11.98% 11.31% 1.79% 5.83 3.64% 4.89% 0.67
Regional
HFRI Emerging Markets (Total) Index 2.26% 19027.90 20.12% 24.36% 2.60% 6.75 7.54% 8.11% 0.88
HFRI Emerging Markets: Asia ex-Japan Index 2.44% 12525.96 29.62% 31.62% 2.75% 9.21 9.59% 11.14% 0.84
HFRI Emerging Markets: China Index 2.10% 1655.60 31.41% 33.68% 3.37% 7.93 10.16% 14.52% 0.71
HFRI Emerging Markets: Global Index 2.21% 12671.41 13.83% 17.93% 2.18% 5.54 5.65% 4.81% 1.08
HFRI Emerging Markets: India Index 7.03% 1167.26 39.59% 45.61% 8.86% 3.75 13.34% 14.96% 0.89
HFRI Emerging Markets: Latin America Index 2.58% 18630.07 16.99% 17.68% 8.10% 1.87 5.58% 13.56% 0.43
HFRI Emerging Markets: MENA Index 3.04% 1255.94 11.35% -0.50% 5.77% 1.73 -0.17% 7.08% -0.05
HFRI Emerging Markets: Russia/Eastern Europe Index 1.40% 15729.17 10.17% 47.62% 6.72% 1.33 13.86% 10.46% 1.26
HFRI Asia with Japan Index 1.18% 1353.72 10.87% 16.94% 1.70% 5.52 5.35% 4.74% 1.03
HFRI Japan Index 1.77% 1610.73 16.74% 27.37% 2.07% 7.08 8.40% 5.76% 1.36
HFRI North America Index 0.61% 1510.36 7.54% 14.16% 1.77% 3.59 4.51% 4.60% 0.89
HFRI Western/Pan Europe Index -0.18% 1432.46 7.01% 10.47% 1.85% 3.17 3.37% 3.55% 0.83
HFRI World Index 0.86% 1316.09 5.71% 8.23% 1.68% 2.74 2.67% 2.91% 0.77
FX-Hedged
HFRI Fund Weighted Composite Index – CHF 0.60% 9651.58 5.94% 6.70% 1.12% 4.30 2.19% 3.64% 0.49
HFRI Fund Weighted Composite Index – EUR 0.67% 3064.81 6.40% 8.92% 1.11% 4.73 2.89% 3.61% 0.69
HFRI Fund Weighted Composite Index – GBP 0.76% 20079.92 7.27% 11.29% 1.13% 5.39 3.63% 3.65% 0.88
HFRI Fund Weighted Composite Index – JPY 0.70% 7631.42 6.73% 9.41% 1.09% 5.12 3.04% 3.62% 0.73
Thematic
HFRI Credit Index 0.82% 1619.47 6.08% 13.98% 1.17% 4.25 4.46% 2.96% 1.34
HFRI Diversity Index 0.61% 1736.86 9.03% 14.51% 1.40% 5.52 4.62% 4.01% 1.04
HFRI Women Index 0.15% 1703.87 9.35% 9.98% 2.09% 3.84 3.22% 4.37% 0.65