Research

Hedge Fund Performance Commentary

Introduction

Hedge funds recovered part of their losses from earlier in the year and were up 1.33%1 in March as underlying markets represented by the MSCI World Index2 gained 5.47% in what shaped up to be a positive month for global markets. The Fed's decision to roll back further on its scheduled interest rate hikes for 2016, coupled with rising oil prices and monetary easing in China provided much need relief for the markets. As of end-Q1 2016, hedge funds are down 0.37%, ahead of underlying markets as the MSCI World Index3 posted losses of 1.97%.

Emerging markets mandated managers had a good month as oil and commodity prices stabilised, lending support to well-performing equity markets within the EM space. Dollar weakness was apparent during the latter half of March following dovish comments from the Fed, leading to some managers capturing gains as the Aussie dollar and Euro rallied during the month. Central bank meetings also dominated the news in March, influencing reversals in the markets. Market reversals did not bode well for some CTA/managed futures and macro managers with returns languishing into negative territory during the month as comments made by central bankers led to choppy trading conditions. Policy shots remain a key theme for central bankers as they attempt to jolt the global economy amid a deflationary environment.

Figure 1: March 2016 and February 2016 returns across regions
 

 

All regional mandates were up this month led by Latin American hedge fund managers with gains of 4.85%, followed by Asia ex-Japan hedge funds which gained 4.78% during the month. Oil price stabilisation and rate cuts from the PBOC propped up the performance for much of the emerging market space and provided some support for the good performance of global equity markets while investor interest in safe haven assets waned in March. Japanese managers were also up 2.45% while North American and European managers were up 1.96% and 0.90% respectively. On a year-to-date basis, Latin American managers topped the table with gains of 6.15%, the only regional mandate to post positive year-to-date returns. Japanese managers performed the worst on a year-to-date basis with losses of 2.83%.

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Footnote

1Based on 55.61% of funds which have reported March 2016 returns as at 14 April 2016

2MSCI AC World Index (Local)

3Ibid

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