Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index will finish up 0.17 per cent in January, based on 74 per cent of assets reporting.
Long/short equity funds outperformed major equity markets in January, finishing down an estimated 1.70 per cent as managers’ lower net exposures protected them from the full brunt of the market correction.
Many managers would have finished in positive territory were it not for long positions in technology stocks which, despite good fundamentals, fell in January on fears over the economic recovery.
In general, equity markets reacted negatively to news of the Greek budget deficit and the concomitant drop of Greek bond prices as well as the Chinese central bank’s credit tightening over concerns of overheating in their housing market.
Event driven managers had a generally positive month, up 1.39 per cent, as a number of managers took advantage of inefficient pricing in smaller issue securities resulting from specific restructuring events as well as banks in Japan and Europe lightening their books.
Credit markets generally performed well and were negatively correlated to equity markets, benefiting a number of credit-oriented managers.
Global macro managers (+1.11 per cent) experienced mixed performance with a number of fundamentally-driven quant macro models posting positive returns after capitalizing on tactical moves in currencies and bonds. On the other hand, managers with heavy equity exposures typically underperformed.
Managed futures posted the worst performance among the sectors, down 3.91 per cent, as trend followers fell prey to increased pressure in commodities markets. The DJ-UBS Commodities Index finished down 7.28 per cent for the month, crude oil fell over eight per cent, and gold was down 1.47 per cent partly as a result of the strengthening US dollar.
