Research

Hedge Fund Performance Commentary for the Month of February 2015

Introduction

Hedge funds extended their gains in the second month of 2015, returning 1.57%1, although falling behind underlying markets as the MSCI World Index2was up 5.47%. Global equity markets rose in unison during February with a return of investor risk appetite as the market downplayed fears of contagion from a possible ‘Grexit’; further supported by accommodative monetary policies from central banks around the world. Volatility faded away along with increased investor confidence and rising equity markets with the CBOE VIX falling from 20.97 to 13.34. The Federal Reserve was seen to be coming under increasing pressure to raise interest rates given the strengthening US economy, though Yellen currently appears content to adopt a ‘wait and see’ approach of preferring to raise rates too late rather than too early, which helped to send US equity markets into record territory once again. Meanwhile, the Greek situation was still at an impasse, although it managed to avoid a short-term default by securing a four month extension of the current bailout programme while negotiations continue.

Figure 1: January and February 2015 returns across regions
 

European managers were the best performers during the month, returning 2.29%. European equities were a major winning theme during the month as the MSCI Europe Index3 rose 6.09%, fuelled by the European Central Bank’s massive asset purchase program of 60 billion euros a month which is set to begin in April. North American funds were also up 2.06%, although falling behind the S&P 500 which gained 5.49% in February. Similarly, funds focused on Latin America and Asia ex-Japan gained 1.77% and 1.65% respectively following strong performance in underlying regional markets. Japanese managers reported gains of 1.23%, trailing the Nikkei 225 which climbed 6.36% on the back of ongoing quantitative easing and a weak yen.

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Footnote

1Based on 41.30% of funds which have reported February 2015 returns as at 12 March 2015

2MSCI AC World Index(Local)

3MSCI AC Europe Index(Local)

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