Macro hedge funds and, more specifically, CTA strategies employing quantitative, trend-following strategies, posted strong gains in November as oil prices plummeted, according to HFR.
The HFRI Macro Index gained +2.6 per cent in November, powered by a gain of +4.6 per cent for the HFRI Macro: Systematic Diversified/CTA Index; both the Macro and CTA Index gains were the strongest since December 2010. The HFRI Fund Weighted Composite Index gained +1.2 per cent for the month, reversing a two-month decline for the broad-based Index, bringing year-to-date (YTD) performance through November to +3.7 per cent. All four main strategy areas tracked by HFR posted gains for the month.
Strong performance in Macro and CTA strategies was driven by persistent and powerful trends across Commodity, Currency, Equity and Fixed Income markets. Oil plunged more than 17 per cent in November, losing over 10 per cent in the final trading day of the month, driven by a combination of moderating global demand and, specifically, the announcement that OPEC would maintain, rather than reduce, current output targets; oil has declined nearly 33 per cent for 2014. In addition to participating in the large move in oil, Macro hedge funds also posted gains across Currency positions, as the US Dollar saw sharp gains against the Japanese Yen, British Pound Sterling and oil-sensitive currencies, including the Russian Rouble and Brazilian Real. The HFRI Macro: Currency Index gained +1.3 per cent in November, while the HFRI Macro: Active Trading Index gained +3.0 per cent and the Macro: Multi-Strategy Index returned +3.0 per cent. The gain in the HFRI Macro: Systematic Diversified/CTA Index brings YTD 2014 performance for the Index to +10.0 percent, the strongest year since the Index gained +18.1 per cent in 2008. Likewise, the gain for the HFRI Macro (Total) Index lifted YTD performance to +5.7 percent, the strongest since 2010 and moving Macro to lead all strategies areas YTD. Prior to 2014, both Macro and CTA strategies had posted three consecutive calendar year declines.
Event Driven equities recovered from a two-month period of volatility with the announcements of large transactions, totalling greater than $100 billion in the same day, lifting the HFRI Event Driven (ED) Index to a gain of +1.2 per cent for the month. ED performance was led by event-equity sensitive strategies with the HFRI ED: Special Situations Index gaining +1.6 per cent in November, while the HFRI ED: Multi-Strategy Index gained +2.7 per cent.
Fixed Income-based Relative Value Arbitrage strategies also posted gains for the month, with the HFRI Relative Value Arbitrage Index up +0.3 percent, bringing the YTD gain to +4.5 per cent. RVA gains were led by Volatility and Credit Multi-Strategies, with the HFRI RV: Volatility Index up +2.0 per cent in November, while the HFRI RV: Multi-Strategy Index was up +1.1 per cent.
Equity-focused hedge funds also posted gains for the month, but these were partially offset by weakness in Energy and Emerging Markets equities. The HFRI Equity Hedge Index gained +0.7 per cent in November, led by gains in Equity Market Neutral and Technology/Healthcare. The HFRI Equity Market Neutral Index advanced +2.1 percent, the strongest monthly return for the characteristically low volatility strategy since December 2000. Similarly, the HFRI EH: Technology/Healthcare Index was up +1.6 per cent for the month, bringing YTD performance for the Index to +7.7 percent, the leading EH sub-strategy. The HFRI EH: Energy/Basic Materials Index posted a sharp decline of -5.9 per cent in November, the third consecutive decline for the Index, bringing the three-month drawdown to -15.0 per cent. The HFRI EM: Russia/Eastern Europe Index declined -9.1 per cent in November, bringing the YTD loss for the Index to -23.0 percent, and contributing to a November decline of -0.8 per cent for the HFRI Emerging Markets (Total) Index.
“Trend-following Macro strategies posted strong gains for November with significant contributions from short oil and long US Dollar positions, vaulting Macro & CTA strategies into performance leadership positions for 2014 and rewarding investors which have remained committed to these classic, sophisticated alternative strategies over the past few years,” says Kenneth J Heinz, President of HFR. “In addition to Macro, Event Driven strategies are expected to benefit from the continued growth and fundamental normalisation of the US economy. As the macroeconomic divergence between the US, Europe and Asia continues to expand into 2015, flexible, tactical strategies which are able to adapt to fluid developments in commodity and currency markets and position investors to benefit from these powerful dynamics are likely to attract investor capital.”
