HFRX Global Hedge Fund index up 0.6 per cent in April
Hedge funds performed well in April, with the HFRX Global Hedge Fund index closing up 0.6 per cent for the month and up 3.8 per cent for the year-to-date.
Anthony Lawler, portfolio manager at GAM, says: "April was in a number of ways a continuation of the opportunity-rich environment we saw in the first quarter for hedge fund managers. Managers traded positively across all strategies and on both the long and the short side of trades. Some took the view that accommodative central banks in the US and Europe would drive risk prices higher and so were positioned tactically long US equities and peripheral European bonds, both of which performed well in April. The standout theme was again the battle against deflation in Japan, which continued to reward traders with a double-digit rally in the Nikkei 225 index and further weakness in the yen. The US dollar remains a popular long, with the short side of the trade rotating largely between the yen, euro and sterling."
The biggest moves on the month came in the commodities universe, where both precious and industrial metals sold off. Gold and silver were subject to a liquidation move as inflationary fears retreated and industrial metals reacted negatively to slowing Chinese growth. The magnitude of these moves surprised many, says Lawler.
"Gold and copper sold off hard, but broadly speaking the impact on hedge funds was very limited. These were generally not widely held conviction positions, long or short. We did see some positive returns from the moves in commodities, but within credit managers' books through long CDS positions in precious metal miners and steel companies."
There is reason for continued cautious optimism, Lawler says: "We see some excellent investment opportunities and believe this environment could continue to deliver good risk / reward trading opportunities for skilled managers. But we remain mindful of the fragility of the current political and policy frameworks. As such, although we are fully invested, by and large we are taking positions that are liquid and can be nimbly moved so that we can adjust if cracks form in the macro backdrop."
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