News & Events

Hedge Fund Performance Commentary

Introduction

Hedge funds were up for the eighth consecutive month in February amid healthy upward movement in most markets. The Eurekahedge Hedge Fund Index gained 1.09%1 during the month, bringing its year-to-date return figure to 1.27%. Market sentiment was buoyant through most of the month, leading to rallies in underlying markets – the MSCI World Index was up 2.75% in February.

Among the regional mandates, the best performance was delivered by Japanese hedge funds, gaining 2.62% in February. Japanese hedge funds investing in financial and insurance stocks, as well as material and mining companies, posted healthy gains – the Nikkei 225 was up 3.77% during the month. Returns from European hedge funds were also positive in February, up 0.55%, while Eastern Europe & Russia-investing funds gained 1.22%. Asia ex-Japan hedge funds witnessed losses to the tune of 1.32% amid declines in underlying markets – the MSCI Asia Pacific ex Japan Index was down 2.36%.

Most other hedge funds also delivered positive returns, with North American hedge funds gaining 2.16% in February. The S&P 500 was up 3.20% in the month, reaching a 32-month high in the third week of the month before declining slightly near the month-end due to heightened geopolitical tensions. Increased risk appetite during the first three weeks led to a sustained rally in the equity markets as better-than-expected corporate earnings and increasingly positive outlook on the global economy lifted market sentiment. North American managers in the merger & acquisition space also took advantage of healthy corporate activity. February was marked by a number of strategic takeovers, leveraged buyouts and spin-off announcements, with a number of funds benefitting from deals in the pharmaceutical sector such as Sanofi-Aventis’s acquisition of Genzyme and the Danaher-Beckman deal. February was the sixth consecutive month of positive returns for North American managers, with the Eurekahedge North American Hedge Fund Index gaining 14.60% since September 2010.

Figure 1: January and February 2011 returns
Figure 1: January and February 2011 returns

North American and Japanese hedge funds lead the way in the year-to-date return measure with returns of 3.12% and 3.73%, respectively. Investors are starting to look at…

 

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Footnote

1 Based on 63.04% of funds which have reported February 2011 as at 15 March 2011.

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