The Eurekahedge Hedge Fund Index was up 2.99%1 in February 2021, outperforming the global equity market as represented by the MSCI ACWI (Local) which gained 2.72% over the same period. Global equity markets resumed their rally in the first two weeks of February on strong earnings and economic recovery hopes as the successful implementation of Biden’s US$1.9 trillion economic stimulus package looked increasingly likely. This combined with the continued speedy rollout of vaccines across the United States led to a huge rise in risk-on sentiment, with the DJIA hitting an all-time high of 31,961.86 on 24 February 2021. Global longer tenor bond yields began to increase steadily mid-month and spiked in the final weeks as concerns around inflation began to emerge. The UK 10-year bond yield and 10-year US treasury note were up 49bp and 34 bp in February respectively, negatively impacting sentiment towards equities and equities sold off in the final week of the month. The DJIA pared gains made in the earlier period of the month, losing 3.2% from the peak and ending February 2021 at 30,932.37.
Over in Europe, returns were positive among equity benchmarks in the region as the CAC 40 and Euro Stoxx 50 took the lead with gains of 5.63% and 4.45% respectively. Returns were mixed across geographic mandates in February with North American and European hedge funds gaining 3.90% and 2.55% respectively while Latin American hedge funds were down 0.68%. Across strategies, CTA/managed Futures and long/short equities outperformed their strategic peers with returns of 3.95% and 3.92% respectively throughout the month. Managers utilising CTA/managed futures strategies benefitted from the strong rise in commodity prices, driven largely by the surge in prices of Brent Crude Oil and West Texas Intermediate Crude oil of 20.06% and 20.28% respectively in February as Saudi Arabia volunteered to cut output beyond levels previously negotiated with OPEC.
Roughly 75.5% of the underlying constituents of the Eurekahedge Hedge Index Fund Index posted positive returns in February, and 13.1% of the hedge fund managers in the database were able to maintain a double digit return in 2021.
Figure 1: February 2021 and January 2021 returns across regions
As of February year-to-date, most of the geographic mandates with the exception of Latin America have recorded positive returns. Global hedge funds registered their best February year-to-date return since 2012 as they returned 4.02%, supported by the strong performance of the global equity market as investor optimism rose due to the anticipated implementation of Biden’s US$1.9 trillion COVID-19 relief bill and the continued rollout of vaccines. North American hedge funds outperformed their regional peers with their 4.98% return, followed by Asia ex-Japan hedge funds which returned 4.02%. At the other end of the spectrum, Latin American hedge funds trailed behind the group with a return of -1.92% as their returns were negatively impacted by the poor performance of the Latin American equity market, with the MSCI EM Latin America Index IMI (Local) returning -4.04% over the first two months of 2021.
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