Hedge funds were up 0.5 per cent during September, outperforming underlying markets as represented by the MSCI AC World Index (Local) which gained 0.19 per cent over the same period.
Close to 63 per cent of underlying constituent funds for the Eurekahedge Hedge Fund Index were in positive territory, with majority of them being long/short equity mandated.
Japan hedge funds led performance among regional mandates, up 1.35 per cent ,while distressed debt managers topped the table across strategies, gaining 1.07 per cent over the same period.
As of 2016 year-to-date, hedge funds are up 3.35 per cent with close to 15 per cent of managers posting double digit returns compared to 14 per cent of managers over the same period in 2015. Roughly 38 per cent of managers posting returns in excess of 10 per cent in 2016 year-to-date are long/short equity mandated while another 19 per cent are CTA/managed futures mandated.
Event driven hedge funds were up 0.54 per cent during the month, and up 6.81 per cent year-to-date as positions in M&A deals within the F&B, pharmaceuticals and technology sector lead performance. Roughly 18 per cent of actively-reporting event driven hedge funds posted double digit returns as of 2016 year-to-date.
On a year-to-date basis, North American hedge fund managers were up 5.40 per cent while their European and Japanese counterparts were in the red, down 0.46 per cent and 2.93 per cent respectively.
The Eurekahedge Distressed Debt Hedge Fund Index posted the best returns among strategic mandates in September and was up 1.07 per cent during the month. Managers also posted impressive year-to-date gains, up 8.66 per cent – the best year-to-date returns for the strategy on record.
Latin American long/short equities hedge funds posted the best year-to-date gains, up 20.42 per cent while Japanese long/short equities hedge funds fared the worst, losing 2.98 per cent over the year.
Asia ex-Japan hedge fund managers gained 0.53 per cent during the month, with strength being led by underlying Greater China and India mandated hedge funds which were up 0.73 per cent and 1.82 per cent respectively over the same period.
All regional mandates were positive in September with Japan managers leading performance among regional mandates, up 1.35 per cent despite the Nikkei 225 and Tokyo Topix ending the month down 2.59 per cent and 0.51 per cent respectively. Japanese equity markets traded higher at the start of the month as better US jobs data led to some weakness in the yen. However, Japanese markets declined as the Fed postponed the much anticipated rate hike and together with the concerns over the Deutsche Bank saga, yen was driven higher towards month-end. Across sectors, Japan managers gained on exposure into energy and consumer discretionary while financial stocks led weakness.
North American hedge funds gained 0.91 per cent, beating the S&P 500 Index which declined 0.12 per cent during the month as a series of events from the US Presidential Debate and banking woes from Europe led to investor jitters.
Latin American hedge funds were also up this month, gaining 0.77 per cent, outperforming the MSCI Latin America Index IMI (Local) which declined 0.30 per cent. Emerging markets mandated hedge funds gained 0.62 per cent in September, buoyed by support from oil price recovery resulting from encouraging outcome of the recent OPEC meeting.
Lacklustre performance of underlying Asian markets did not deter Asia ex-Japan managers from posting gains of 0.53 per cent during the month, beating the MSCI Asia ex-Japan Index (Local) which fell 0.59 per cent over the same period.
On a year-to-date basis, Latin American hedge funds led the table, gaining 17.15 per cent over the past nine months with performance held up by the region well-performing equity markets. Brazil Ibovespa Index gained 34.64 per cent year-to-date, allowing managers to profit from their long books throughout the past nine months. Broader emerging market mandated hedge funds also posted impressive year-to-date gains, up 7.68 per cent with performance supported by recovering oil prices and the intermittent weakness of the USD vis-a-vis commodity currencies propping performance of underlying emerging markets commodities.
North American managers were also up year-to-date, gaining 5.40 per cent followed by Asia ex-Japan managers which posted gains of 2.39 per cent. On the other hand, European and Japanese managers were down 0.46 per cent and 2.93 per cent year-to-date respectively.
Performance was mixed across strategic mandates, with macro mandated hedge funds being the only strategic mandate to post negative returns during the month. Macro mandated hedge funds lost 0.50 per cent in September with funds positioned for central bank announcements and OPEC inaction seeing some losses. On the other hand, distressed debt hedge funds led performance across strategic mandates with gains of 1.07 per cent during the month as recovering oil prices and some M&A activity within the energy sector propped up valuations of underlying assets. As a result, distressed debt managers were able to reap returns from the previous purchase of troubled assets during the downtrend in oil prices. Long/short equities hedge fund managers gained 0.73 per cent in September with underlying equity long bias hedge funds up 0.71 per cent, despite lacklustre performance of global equity markets.
Relative value hedge fund managers gained 0.72 per cent during the month with performance supported by underlying opportunistic volatility strategies, represented by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index, which gained 0.78 per cent over the same period. While volatility levels were subdued towards the end of the month, the VIX Index traded higher particularly in the middle of the month, before declining in the final week of September.
Arbitrage managers gained 0.58 per cent, followed by event driven hedge fund managers which were up 0.54 per cent as exposure into M&A deals within F&B, pharmaceuticals and technology industries among performance drivers.
Multi-strategy and CTA/managed futures hedge funds were also up in September gaining 0.47 per cent and 0.33 per cent respectively during the month. The performance of CTA/managed futures managers was led by exposure into long energy, commodities and short GBP/USD positions with underlying commodity hedge funds, represented by the Eurekahedge Commodity Hedge Fund Index gaining 0.51 per cent while trend following hedge funds, also a sub-set of the broad CTA index, declined 1.14 per cent during the month.
On a year-to-date basis, distressed debt hedge funds were up 8.66 per cent followed by event driven and relative value hedge funds which gained 6.81 per cent and 6.21 per cent respectively as M&A activity and current price dislocations of underlying assets present ample opportunities for managers. Given that the oil recovery remain sustainable towards Q4 2016, distressed debt hedge funds could be on track as the best performing hedge fund strategy this year.
