Macro Systematic Diversified hedge funds experienced a powerful recovery in July, reversing sharp losses from the prior month with gains across commodity, currency and equity positions, according to data released today by HFR.
Offsetting these gains, hedge funds with exposure to China, Energy and Discretionary Commodity posted losses for the month, with these divergent performance groups resulting in overall mixed industry performance for July. The HFRI Fund Weighted Composite Index posted a narrow gain of +0.01 per cent for the month, bringing YTD performance through July to +2.5 per cent. The industry’s largest funds outperformed small and mid-sized funds in July, with the asset-weighted version of the FWC posting a gain of +1.4 per cent.
Equity Hedge strategies declined in the month, with the HFRI Equity Hedge Index falling -0.8 per cent, with negative contributions from funds with exposure to China and Energy equities.
The HFRI EM: China Index fell -7.7 per cent, its worst monthly performance since September 2011, although this decline is only approximately half that of the Shanghai Composite Index, which fell by -14.3 per cent for the month. Energy equities also posted declines for July, with the volatile HFRI EH: Energy/Basic Materials Index falling -6.7 per cent, its worst monthly decline since May 2012. Partially offsetting these declines, the HFRI EH: Technology/ Healthcare Index gained +2.1 per cent for July, leading all sub-strategy indices for 2015 with a YTD gain of +11.3 per cent.
Gains across CTAs lifted Macro to the top-performing strategy group for the month, with the HFRI Macro Index gaining +1.2 per cent. The HFRI Macro: Systematic Diversified/CTA Index gained +2.1 per cent in July, partially reversing the decline of -3.5 per cent from June, the worst monthly decline since May 2011. Systematic Diversified/CTA strategy gains were concentrated in exposures to short commodity, long US Dollar, and variable equity market positions, with many of these positions having reversed from June, as quantitative models tracked strong and robust trends across these asset classes. The July gain brings the CTA Index back into positive territory for 2015, with a YTD gain of +0.4 per cent.
Performance across both Event Driven (ED) and Fixed Income-based Relative Value Arbitrage (RVA) strategies were also mixed for July, with the HFRI Event Driven Index posting a narrow decline of -0.3 per cent, while the HFRI Relative Value Arbitrage Index fell -0.03 per cent. Activist strategies once again led ED sub-strategy performance, with the HFRI Activist Index advancing +1.4 per cent for the month; the Index leads ED sub-strategies YTD with a gain of +6.8 per cent. RVA sub-strategy performance was led by strategies which trade volatility as an asset class, with the HFRI RV: Volatility Index gaining +2.1 per cent for the month; the Index leads RVA sub-strategies YTD with a gain of +7.9 per cent. The weakest area of RVA performance was from yield alternative strategies, with the HFRI RVA: Yield Alternative Index declining -1.2 per cent for the month.
“Mirroring intense asset volatility in broader financial markets, mixed hedge fund performance in July was driven by powerful and divergent trends, with CTA gains offset by China and Energy losses, while the industry’s largest funds outperformed small and mid-sized funds, resulting in aggregate cap-weighted gains for investors,” says Kenneth J Heinz (pictured), President of HFR. “While the concentrated sectoral and regional weakness occurred in areas with highly specialised exposures, broader trends across major strategies continue to be favourable and the outlook for investors in 2H15 positive. Industry performance is likely to be led by the industry’s leading and most well-established hedge funds, capturing opportunistic gains as financial market volatility rises and falls through a challenging environment of post-QE normalisation.”
