Hedge funds gained for the second consecutive month up 0.77%1 in November outperforming underlying markets as represented by the MSCI AC World Index All Core2, which gained 0.38% during the month. November was dominated by the theme of a US rate hike later in the year, along with the European Central Bank's (ECB) dovish stance regarding further easing in the Eurozone. The latter has been to some extent realised earlier in December when the ECB decided to cut deposit rates even further, adding to their menu an ever expansive array of negative yielding bonds on offer from countries otherwise plagued with anaemic growth. It would be interesting to see how this easy credit and the simultaneous calls for reforms aka austerity will lead the Eurozone onto firmer grounds. Meanwhile markets struggled with soft PMI data from China which led commodity markets further into the red. Oil prices remained under pressure during the month despite rising inventories, and it is unlikely that OPEC may be reducing production in the near term — especially with Saudi Arabia and Russia/Iran embroiled in a proxy war in Syria where the latter are likely to gain more from any price increase.
All regional mandates were up this month — Europe and Japan focused hedge funds lead the table with gains of 0.82% each. Japanese hedge funds posted positive performance on the back of improved investor sentiments with positive Q3 economic growth as well as commitment from the Bank of Japan (BoJ) to meet its inflation target. Japanese equity markets have also performed well during the month with the Nikkei 225 and the Tokyo Topix both up 3.48% and 1.42% respectively. European managers also posted positive performance during the month with gains of 0.82% backed by positive equity market performance, optimism on the ECB stimulus measures and positions in the EUR/USD currency pair. The DAX and CAC both posted gains during the month, up 4.90% and 1.22% respectively.
North American managers came in third with gains of 0.61% despite some temporary volatility after FOMC comments on the rate hike earlier in the month; nonetheless the American equity markets indexes ended the month in positive territory. In Latin America, managers have posted gains of 0.44% this month with renewed optimism in the region on the back of current political events. The Argentinean MERVAL has reflected investor optimism following the recent elections gaining 4.09% during the month, thus benefitting hedge funds with long exposure to some Argentinean equities.
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