Research

Hedge Fund Performance Commentary

Introduction

Hedge funds successfully traded their way around an overwhelming month in June and were up 0.63%1 while underlying markets as represented by the MSCI World Index2 lost 1.38% during the month. A number of managers had lowered their overall risk exposure in the lead up to Brexit, and were quick to reverse their positions and capitalise on winning trends that emerged subsequently such as the rally in the yen and emerging currency pairs vis a vis US dollar; and short positions in the pound which declined to historic lows. CTA/managed futures managers were the top gainers, leading the performance of strategic mandates this month as managers were able to capture key macro trends in the markets. While the Brexit referendum has thrown markets off-balance in June, equity markets recovered in the final week of June and volatility levels reversed its mid-month spike as the markets somewhat got over the initial Brexit shock.

While performance has varied across regional exposures and strategic mandates as of 1H 2016, almost 20% of the managers have posted first half returns in excess of 5%, with almost 15% delivering returns upwards of 7%. Of these funds delivering upwards of 7% on a year-to-date basis, long/short equities and CTA/managed futures strategies constitute a good one-half of the funds, with managers focused on North American equities featuring strongly in this pool.

Figure 1: June 2016 and May 2016 returns across regions
 

 

Performance was mixed among regional mandates for the month of June with Latin American managers a clear lead among their regional peers, gaining 4.17%, followed by North American managers who were up 1.02% over the same period. Asia ex-Japan managers also ended the month in positive territory, up 0.44%. On the other hand, Japanese and European managers were down in June, posting losses of 2.43% and 1.57% respectively.

On a year-to-date basis, Latin American managers lead the tables once again, up 12.81% followed by North American managers who gained 2.80%. Year-to-date performance for other regional mandates was lacklustre with Japanese managers posting the steepest loss down 5.48%. European and Asia ex-Japan managers were also in the red, down 2.89% and 1.96% respectively year-to-date.

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Footnote

1Based on 47.89% of funds which have reported June 2016 returns as at 13 July 2016
2 MSCI AC World Index (Local)
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