Introduction
The Eurekahedge Hedge Fund Index was up 1.57%1 in December and 8.74% for the year, recording its strongest annual return since 2013. The risk-on sentiment resulting from positive geopolitical development provided support for risk assets as the two-leading economies officially reached an agreement that de-escalated their 18-month long trade tension. The global equity market as represented by the MSCI ACWI (Local) ended 2019 up 23.44%. US equities recorded new all-time highs, with the S&P 500 up 2.86% in December on the back of market optimism toward the US-China phase-one deal which was signed in early 2020. Over in Europe, UK equities outperformed their European peers, thanks to the landslide victory of the UK Conservative Party, which resulted in better clarity surrounding Brexit. The FTSE 100 rose 2.67% during the month. On a similar note, positive trade development, monetary stimulus, and strong macroeconomic data acted as a tailwind to the performance of Asian equity markets, especially China — the Hang Seng Index and Shanghai Composite Index were up 7.00% and 6.20%, respectively in December. Meanwhile, global government bond markets slumped during the month as yields climbed higher.
Approximately 78.7% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in December, and 44.6% of the fund managers in the database were able to generate double-digit returns over the year. Returns were positive across regions, with Asia ex-Japan fund managers up 2.58% in December, thanks to the strong equity market performance in the region. Fund managers focusing on Japan underperformed their regional peers as they returned 1.51% over the month. Looking at year-to-date performance, Asia ex-Japan hedge funds have returned 12.03%, ahead of their North American peers who were up 9.32%.
Figure 1: December 2019 and November 2019 returns across regions
Figure 2 illustrates the year-to-date performance of hedge fund managers across regions. Supported by the strong performance of the global equity and bond markets, all regional mandates were up for the year, with Latin American hedge funds leading the pack with their 16.05% return. On the other end, fund managers focusing on Japan have returned 6.14% year-to-date, trailing behind the other regional mandates.
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