Research

Hedge Fund Performance Commentary

Introduction

Hedge funds registered their second consecutive month of losses since the start of the year, with the Eurekahedge Hedge Fund Index declining 0.54%1 inMarch, while still outperforming the MSCI World Index2 which ended the month down 2.21%. The average return of the global hedge fund was pulled into negative territory in March as choppy trading conditions across commodities, and weaker global equity performance continued to affect the trading scene. March was marked by investors’ concerns over the US and China trade war which made headlines throughout the month and negatively affected the global equity markets, most of which ended the month in the red. As of Q1 2018, hedge funds are down 0.13%, ahead of underlying markets as the MSCI World Index posted losses of 2.24%. Close to 55% of managers were in positive territory, and roughly 6% posted year-to-date returns in excess of 10% over the first quarter. Latin American managers led among regional mandates this month with their 0.81% gain, while distressed debt managers topped the table across strategies, gaining 5.74% over the month.

Looking at year-to-date performance, Latin American managers outshone their peers from other regions with gains of 5.19%. Meanwhile, distressed debt hedge fund managers posted the best Q1 2018 performance among all strategies based on preliminary numbers, gaining 7.83% over the quarter, followed by relative value managers who generated gains of 1.01%.

Figure 1: March 2018 and February 2018 returns across regions
 

Performance across regional mandates was a mixed bag in March, with Latin American mandated hedge funds the only regional mandate to end the month in positive territory, up 0.81% as manager’s performance was supported by the strength in underlying equity markets in Latin America. The Ibovespa Index was up a modest of 0.01% in March and up 11.73% year-to-date, supported by interest rates cut and falling inflation numbers in Brazil. On the other hand, Japanese hedge funds posted the steepest loss among regional mandates, declining 1.69% during the month. Asia ex-Japan hedge funds were also down this month, losing 1.44%, followed by European and North American hedge funds which were down 0.72% and 0.14% respectively.

As of Q1 2018, the Eurekahedge Latin America Hedge Fund Index led among regional mandates and was up 5.19% year-to-date. Meanwhile, Japanese dedicated mandates have been the worst performers for the year with the Eurekahedge Japan Hedge Fund Index down 1.58% year-to-date amid yen appreciation. North American and European hedge funds were also down 0.36% and 0.32% over the same period with the uncertainty surrounding Brexit likely to complicate things further for the European region. Asia ex-Japan mandates also languished, down a modest 0.18% year-to-date.

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Footnote

1 49.78% of funds which have reported February 2018 returns as at 14 March 2018
2 MSCI AC World Index (Local)
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