Research

Hedge Fund Performance Commentary

Introduction

Hedge funds gained 0.34% during the month of March, with their first quarter performance up 2.29%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 0.79% in March and are up 5.06% in the first quarter of the year. March was marked by investor scepticism over the Trump administration as proposed healthcare reforms to replace Obama’s Affordable Care Act did not meet intended outcomes. This led to an overall cautious sentiment in the market over the administration’s ability to deliver reforms in other sectors as promised during Trump’s campaign. Aside from developments in the White House, the Fed has delivered on market expectations by raising the interest rate in March though the pace of interest rate hike remains largely unchanged at an average of three rate hikes for the year. Outside of the US, the triggering of Article 50 has kick-started the official Brexit process. Strength in the Eurozone inflation rate has also propped up expectations of tightening from the ECB, which could see a convergence of monetary policy outlook for the world’s major central banks in the next 12 months.

Long/short equities and event driven hedge funds feature strongly among the pool with gains of 3.82% and 3.65% for Q1 2017. Among regional mandates, Latin America and Asia ex-Japan focused funds outshone regional peers, gaining 6.04% and 5.73% respectively.

Figure 1: March 2017 and February 2017 returns across regions
 

 

Performance among regional mandates was a mixed bag this month, with Asia ex-Japan leading the table, up 2.02% despite lukewarm equity market performance across Asia. Underlying Greater China and Indian hedge fund managers propped up the performance of these managers with gains of 2.88% and 4.18% respectively.

European hedge funds follow next with gains of 0.73% backed by fair strength in the region’s equity markets and expectations over a hawkish ECB monetary policy stance over the coming months thanks to positive headline inflation in the Eurozone. North American hedge fund managers were also in positive territory in March, up 0.52%. Latin American hedge funds gained a marginal 0.02%, with the slack coming from lacklustre equity market performance in Brazil. On the other hand, Japan mandated hedge funds languished into negative territory this month, down 0.23% with the mid-month sell-off in Japanese equities edging the Nikkei 225 lower, down 1.10% for the month.

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