Introduction
The Eurekahedge Hedge Fund Index was down 1.73%1 in February, outperforming the underlying global equity market as represented by the MSCI ACWI (Local) which lost 7.84% over the month. Global equities rallied earlier into the month, supported by the improving situation in China over the COVID-19 outbreak and stimulus packages announced by central banks. The tech-heavy NASDAQ Composite recorded a new all-time high for the week ending February 14, as the encouraging macroeconomic data in the region also contributed to its performance during the period. However, the market risk sentiment quickly shifted towards the end of the month as investors grew concerned over the surging number of newly infected people outside China, particularly in South Korea and Italy, resulting in global equity sell-offs over the final week of the month. For the week ending February 28, the DJIA and S&P 500 plummeted 12.36% and 11.49% respectively – recording their worst weekly returns since the 2008 global financial crisis. On a similar note, European equities finished the month in negative territory, despite the dovish stance exhibited by the ECB and fiscal stimulus packages announced by the German government. The FTSE100 and DAX Index were down 9.68% and 8.41% respectively during the month. On the other hand, Asian equities outperformed their global peers as the spread of COVID-19 in Mainland China decelerated. The Shenzhen Composite Index gained 2.56% during the month, and the Hang Seng Index recorded a small loss of 0.69% in February.
Approximately 34.4% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in February, and 41.7% of the fund managers in the database were able to generate positive returns in 2020. Returns were negative across regions, with Asia ex-Japan fund managers down 0.70% in February, outperforming their regional peers over the month. Fund managers focusing on Europe lost 2.35%, despite the ECB’s accommodative stance. Looking at year-to-date returns, Asia ex-Japan hedge funds lost 0.81%, ahead of their North American peers who were down 2.23%.
Figure 1: February 2020 and January 2020 returns across regions
The figure below illustrates the 2020 performance of hedge fund managers across regions. All regional mandates were down for the year, despite the positive geopolitical development surrounding the US-China trade negotiations earlier into the year. The global COVID-19 outbreak resulted in the weak performance of global equities and bonds which contributed to the mixed performance of fund managers throughout the month. Asia ex Japan hedge funds led the pack with their 0.81% loss in February 2020. On the other end, fund managers focusing on Japan were down 5.11% over the same period, trailing behind the other regional mandates.
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