Research

Hedge Fund Performance Commentary

Introduction

Hedge funds posted their fifth consecutive month of gains, returning 0.54%1 in May, while the MSCI World Index2 was up 0.81%. Asian hedge funds were strong performers this month with both Japanese and Asia ex-Japan hedge funds outperforming underlying markets. Japan mandated funds reported gains of 2.06%, followed by Asia ex-Japan mandated funds which were up 1.81% during the month. Indeed, good performance of Asian hedge funds was backed by strong equity market performance in the region. Japanese equity markets performed well during the month with the Nikkei 225 and the Tokyo Topix posting gains of 5.34% and 5.08% respectively. In China, the Chinese equity market posted double digit gains this month for the Shanghai and Shenzhen Composite Indexes, returning 16.42% and 31.50% respectively. Meanwhile, potential signs of recovery in the European market contributed to some investor optimism as inflation rate exceeded expectations in May 2015. Seen in Figure 1, Europe mandated funds came in third this month with gains of 0.63%.

Figure 1: May and June 2015 returns across regions
 

 

Japanese managers were among the best performers of the month with gains of 2.06%, bolstered by optimism in the Bank of Japan’s (BOJ) strong commitment to achieve its inflation rate target and good performance of the Nikkei 225 constituents during the month. With gains of 2.24%, Japanese long/short equity funds performed well on the back of strong gains in underlying equity markets. On the whole, the Eurekahedge Japan Hedge Fund Index is up 5.22% for 2015.

Asia ex-Japan managers were also among the best performers this month with gains of 1.81%. Riding on market optimism in the Chinese equity market, hedge funds with a Greater China mandate posted gains of 3.36% during the month. On a year-to-date basis, Asia ex-Japan managers have delivered the best gains among the broader regional mandates and are up 15.00%, largely boosted by stellar performance of Greater China mandated funds which have posted year-to-date gains of 25.91%. Indian mandated hedge funds have also performed well with gains of 3.24% in May and a year-to-date gain of 5.66%. With year-on-year Indian GDP growth rates outstripping those of China as of Q1 2015, we can expect the rally in Indian equity markets to continue to provide support to the country’s long-biased equity hedge funds.

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Footnote

1Based on 45.57% of funds which have reported May 2015 returns as at 11 June 2015

2MSCI World Index All Core (Local)

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