Digital Assets Report

Newsletter

Like this article?

Sign up to our free newsletter

Hedge funds’ positive monthly gains continue in September

Related Topics

Hedge funds continued their run of positive monthly gains in September, with the HFRX Global Hedge Fund index up 0.6 per cent, extending overall gains in the third quarter to 2.2 per cent. 

The top-performing strategy for the month was equities, with the HFRX Equity Hedge index up 1.5 per cent as managers were able to take advantage of benign equity market conditions and limited volatility. Returns in other strategies were more muted.
 
For the quarter, the HFRX Event Driven index was the stand-out strategy, extending year-to-date positive performance to 7.2 per cent.
 
GAM portfolio manager Anthony Lawler (pictured) says: “The wider macroeconomic growth picture has been subdued but not outright poor, which has kept risk assets relatively supported through the month and quarter. The most significant asset moves in September were in the commodities space, where rumours of an OPEC agreement on oil production cuts spurred energy-related assets. Although fixed income and equity markets ended the month largely flat, there were significant mid-month moves, with rates increasing sharply before falling back into month-end.”
 
In the macro space the HFRX Macro/CTA index in USD was down 0.1 per cent for the month and down 0.8 per cent for the quarter.
 
Lawler says: “September was a microcosm of the third quarter with somewhat directionless volatility driving muted returns as discretionary and systematic strategies offset each other. Discretionary managers were wary of taking significant directional risk, given the heavy central bank calendar in September, and so concentrated on generating marginal gains in more relative value focused strategies. More directional positioning was accretive on the whole, with emerging markets allocations providing positive contributions.
 
“Trend strategies had a tough month as a number of widely owned trends reversed in reaction to central bank announcements. Gains in equities, precious metals and fixed income early in September reversed mid-month on ECB disappointment, only to rebound with the Fed holding rates steady later in the month. This resulted in gains for long bond and equity index positions but whipsawed managers who had adjusted positioning. In short, September was heavily impacted by central bank actions.”
 
The equity hedge strategies had another positive month and continued their solid year-to-date performance. Lawler says: “Managers who had little risk in their portfolios at the outset of the quarter following the Brexit vote were increasingly willing to increase risk exposure towards the end of the quarter and benefited from supportive equity markets.”
 
Although September was a relatively quiet month in the event driven space, it capped a strong quarter for the strategy. “Event driven investment strategies continued to outperform, with investments in distressed credit and special situation equities broadly appreciating in value,” Lawler says.
 
Risk levels and manager conviction are varied across the universe. Lawler says: “In pockets of the equity space, managers are increasingly confident on their positions and willing to increase exposures. However, this is not reflected in macro traders, where aside from specific themes, they are more comfortable allocating to micro dislocations and keeping risk levels subdued. The outlook for the market appears range-bound with potential spikes in volatility around macro/political events. With assets richly priced, we would be minded to remain allocated to strategies that can keep risk applied, including systematic managers, while maintaining the ability to remain liquid in order to redeploy to niche opportunities as they arise.”

Like this article? Sign up to our free newsletter

Most Popular

Further Reading

Featured