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Technology and energy lead HFRI in September

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Hedge funds advanced in September to conclude a strong third quarter, driven by gains in specialised technology, healthcare and energy exposures, according to data released by HFR.

The HFRI Fund Weighted Composite Index (FWC) gained 0.6 per cent for the month, increasing the index value to 12795.52, posting its seventh consecutive month of positive performance, and bringing the third quarter gain to 3 per cent.
 
Through the first nine months of 2016, the HFRI FWC has gained 4.2 percent, leading the MSCI World Index.
 
Resurgent equity hedge strategies led hedge fund industry performance for the month, as global equity markets posted mixed or flat performance. The HFRI Equity Hedge Index gained 1.1 per cent in September, completing the quarter at +4.7 per cent and recovering early year declines to bring YTD performance to +4.2 per cent.
 
September performance was led by the HFRI EH: Technology/Healthcare Index, which gained 4.0 per cent, the strongest month since September 2010, leading 3Q performance across all sub-strategies with a gain of 7.6 per cent. The volatile HFRI EH: Energy/Basic Materials Index added 1.5 per cent in September, bringing 3Q performance to +7.3 per cent and leading all strategies YTD with a +19.0 per cent return. The HFRI Equity Hedge: Asset Weighted Index posted a gain of 0.8 per cent for September.
 
The fixed income-based HFRI Relative Value Index advanced 0.9 per cent for the month, as the US Federal Reserve maintained interest rate policy while investors positioned for near-term rate increases. The monthly gain brings 3Q performance to +3.1 per cent and the YTD return to +5.9 per cent.
 
RVA sub-strategy September performance was led by the HFRI RV: Volatility Index, which gained 1.6 per cent for the month, and the HFRI RV: Sovereign Index, which added 1.2 per cent. For the first nine months of 2016, RVA sub-strategy performance was led by the HFRI RV: Yield Alternative Index, which has gained 13.0 per cent.
 
The HFRI Event-Driven Index also advanced for September, gaining 0.7 per cent in the month, closing 3Q at +4.4 per cent, and leading all main strategies YTD with a +6.7 per cent return. Event-Driven sub-strategy performance was again led by the HFRI ED: Distressed/Restructuring Index, which advanced 1.3 per cent in September, bringing YTD performance to +9.5 per cent, leading all ED sub-strategies indices. The HFRI ED: Activist Index declined 0.5 per cent for September, though has gained 4.5 per cent YTD.
 
Macro hedge funds posted mixed performance across currencies and commodities for the month, as the HFRI Macro Index declined 0.3 pe rcent, paring the YTD gain to 1.8 per cent. Macro sub-strategy declines were led by the HFRI Currency Index, which lost 1.0 per cent in the month. Partially offsetting these losses, the HFRI Commodity Index advanced 1.1 per cent in September, bringing YTD performance to +5.8 per cent. Both CTA and Discretionary Macro strategies experienced mixed performance for the month, as the HFRI Systematic Diversified Index fell 0.7 per cent, while HFRI Macro: Discretionary Thematic Index posted a narrow gain of 0.1 per cent.
 
“Hedge funds concluded the quarter with strong equity market outperformance in September, expanding the positive performance differential over global equities and narrowing the YTD differential with US equities,” says Kenneth J Heinz (pictured), president of HFR. “With equity markets near record highs, expectations for near-term US rate increases and US election uncertainty dominating the coming months, HFRI performance, especially in event driven and equity hedge sub-strategies, is likely to top equity markets for FY 2016.”

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