Research

Hedge Fund Performance Commentary

Introduction

Hedge funds gained 1.03% during the month of December, with 2016 returns coming in at 4.48%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 2.38% in December with its 2016 returns coming in at 7.37%. North American equity markets traded higher in December as the Trump-driven reflation theme buoyed markets in a somewhat ‘honeymoon’ period post-election. The S&P 500 Index gained 1.82% during the month, with the DJIA also up 3.34%.
                                                                                   
Indeed, central bank actions in the developed world outside of the US have helped to mediate year-end jitters to some extent. The ECB and BOJ remained committed to their current policies, which in turn also supported the performance of underlying equity markets. Ongoing political and economic events hold much uncertainty in store for 2017, and it remains to be seen how long markets will continue sing to the tune of Trump’s rhetoric once he takes office later this month.

Figure 1: December 2016 and November 2016 returns across regions
 

 

Performance across regional mandates was a mixed bag during the month, with Asia ex-Japan mandated hedge funds losing 0.40% – the only regional mandate to post negative performance in December. On the other hand, North American mandated hedge funds reported the best gains for the month, up 1.22%, followed by European, Latin American and Japanese managers who were up 1.07%, 0.85% and 0.83% respectively.

As of 2016, Latin American hedge funds led the tables, gaining an impressive 19.35% over the year thanks to the performance of underlying equity markets and the recovery of oil prices. Brazil’s Ibovespa Index gained 38.93% for the year, in what seems to be the best performing equity market worldwide. North American mandated hedge funds also posted good year-to-date gains, up 7.80%, followed by Japan and Asia ex-Japan mandated hedge funds which gained 0.55% and 0.39% respectively over the same period. On the other hand, European hedge fund managers languished into negative territory, declining 0.24% for the year.

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