Introduction
Hedge funds posted their fourth consecutive month of gains this year, up 0.64%1 during the month of April. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) were up 1.17% over the same period. The Macron vs. Le Pen run-up to the French presidential election provided some relief for the markets especially for European equities as expectations for a Macron victory in the second round seemed likely. In the Eurozone and elsewhere in the world, economic data for Q1 2017 was largely encouraging with indicators pointing towards global economic expansion. However, strained geopolitical relationships among major powers and challenges faced by America’s trade partners on the back of Trump’s anti-trade rhetoric places the direction of economic recovery in a precarious position. With his proposed reforms in home ground still rather shaky, the course of Trump’s America is still anyone’s guess.
Figure 1: April 2017 and March 2017 returns across regions
Among regional mandates, Asia ex-Japan hedge fund managers topped the table for the month, gaining 1.28% followed by European and Latin American managers with gains of 1.10% and 0.99% respectively. The first round of the French presidential elections saw Macron and Le Pen heading towards the second round of the elections and this provided some relief for European equity markets. Optimism on a centrist Macron victory buoyed equity markets across the board and coupled with encouraging macro data from Europe, the potential for further disintegration of the EU bloc coming from ‘Frexit’ became less alarming. Latin American equities were modest in April, with the Mexican IPC Index gaining 1.48% while the Brazilian Ibovespa Index was up 0.48% over the same period. The renegotiations of the NAFTA deal by the Trump administration proved to be a relief for the three countries in the agreement, which would otherwise have seen the NAFTA being abolished. However, much remains to be seen as the extent of renegotiations remains a big question mark. North American and Japan managers were also in positive territory this month, gaining 0.98% and 0.40% in April.
On a year-to-date basis, Latin American managers outshone regional peers, and were up 7.41% followed by Asia ex-Japan peers who posted gains of 7.12% over the same period. European, North American and Japanese managers are also in positive territory as of April 2017 year-to-date, up 3.41%, 2.94% and 2.04% respectively.
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