Introduction
The Eurekahedge Hedge Fund Index was down 0.71% in May1 , following four consecutive positive months since the beginning of the year. Hedge fund managers struggled to generate returns amidst the risk-off environment resulting from the re-escalation of the US-China trade war. The Trump administration’s decision to raise tariffs on Chinese imports prompted the other side to launch retaliatory tariffs, leading to worsening global economic outlook which weighed on global equities during the month. The MSCI ACWI (Local) ended the month down 6.12%. On the other hand, the US 10-year treasury yield dipped to its lowest point in almost two years, as investors expect that the Fed will have to cut interest rates in near future. On a year-to-date basis, hedge fund managers are still up 4.32% as of May 2019.
Approximately 41.6% of the hedge fund managers tracked by Eurekahedge posted positive returns in May, and 15.0% were able to generate double-digit gains year-to-date. Returns were largely negative across regions, with Asia ex-Japan fund managers down 2.04% as the deteriorating trade relation between the US and China weighed on the region’s equity market performance. Fund managers focusing on North America fared slightly better, ending the month down 1.22%. Both mandates had enjoyed strong Q1 performance on the back of robust economic growth and accommodative central bank policies, and are still up for the year. North American hedge funds have returned 5.28% year-to-date, slightly behind their Asia ex-Japan peers who were up 5.51% over the first five months of 2019.
Figure 1: May 2019 and April 2019 returns across regions
The figure below illustrates the year-to-date performance of hedge fund managers across regions. Despite the weak May performance of the global hedge fund industry, all of the regional mandates were still up for the year, with Asia ex-Japan leading the pack. On the other end, fund managers focusing on Japan have returned 1.38% year-to-date, trailing behind the other regional mandates.
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