Data from HFR shows that hedge funds advanced in August led by a resurgence in Energy/Basic Materials and Activist strategies.
The HFRI Fund Weighted Composite Index (FWC) gained +0.4 per cent for the month, increasing the Index Value to 12,709 and bringing year to date performance to +3.5 per cent.
After posting losses in the first two months of the year, the HFRI FWC has now produced gains in six consecutive months, the firm writes. The HFRI Asset Weighted Composite Index advanced +0.4 per cent for the month, bringing YTD performance to +0.5 per cent. Event-Driven (ED) strategies led industry performance in August, driven by strong contributions from Activist and Distressed strategies. The HFRI Event-Driven Index advanced +1.8 per cent for the month, bringing YTD performance to +6.0 per cent, the leading area of strategy performance.
Shareholder Activist strategies surged for the second consecutive month, as the HFRI ED: Activist Index added +3.7 per cent in August, following a gain of +3.1 per cent in July. Distressed strategies also saw strong gains for the month, as the HFRI ED: Distressed Index advanced +2.1 per cent, bringing YTD performance to +8.1 per cent, the leading area of ED sub-strategy performance. The HFRI Event-Driven (Asset Weighted) Index gained +2.6 per cent in August.
Equity Hedge strategies also posted strong monthly gains, led by Energy & Basic Materials exposures, with the HFRI Equity Hedge Index advancing +1.3 per cent, bringing the YTD gain to +3.4 per cent. The volatile HFRI EH: Energy/Basic Materials Index jumped +3.4 per cent in the month as Oil surged, leading sub-strategy performance for both August and YTD; the Index has gained +16.7 per cent in 2016. The HFRI Fundamental Value Index advanced +1.7 per cent in August, while HFRI EH: Multi-Strategy Index added +1.6 per cent.
Fixed income-based Relative Value Arbitrage (RVA) strategies also posted gains in August despite little change in both government and corporate high yield credit. The HFRI Relative Value Index advanced +0.8 percent in the month, bringing YTD performance to +4.9 per cent, as ultra-low and negative interest rates extended through mid-year. RVA sub-strategy performance was led by exposure to corporate bonds, as the HFRI RV: FI-Corporate Index gained +1.4 per cent, bringing the YTD return to +8.2 per cent. The HFRI RV: Yield Alternative Index advanced +1.2 per cent in the month and leads RVA sub-strategy performance YTD with a gain of +12.5 per cent. The HFRI RV: Convertible Arbitrage Index also added +1.3 per cent for the month and is up +5.4 per cent YTD.
The HFRI Macro (Total) Index declined -1.6 per cent in August, led by declines in quantitative, trend-following CTA strategies, paring the YTD gain to +2.0 per cent; the HFRI Macro Index (Asset Weighted) posted a decline of -1.0 per cent in August. CTAs experienced declines across positions in Energy, which gained in a strong reversal from the prior month, as well Fixed Income strategies. The HFRI Macro: Systematic Diversified Index declined -2.9 per cent in August, paring the YTD gain to +2.1 per cent. Fundamental and Discretionary Macro strategies were little changed for the month, as the HFRI Currency Index declined -0.30 per cent and the HFRI Commodity Index fell -0.4 per cent, while the HFRI Discretionary Thematic Index gained +0.4 per cent.
“Specialised strategies across Event Driven and Equity Hedge, including Energy-focused, Distressed and Shareholder Activist posted strong gains to lead hedge fund performance in August as Oil surged while global equities, interest rates and high yield credit were essentially unchanged for the month,” says Kenneth J. Heinz, President of HFR. “In an environment dominated by demands for ultra-liquidity, a common performance theme is each of these leading strategies captures a liquidity premium over an intermediate timeframe by leveraging both fundamental and transactional specializations. Sophisticated investors and institutions which are able to assume these risks are likely to continue generating strong performance through 2H16.”
