Hedge funds posted gains for the sixth consecutive month, as trend-following, quantitative macro strategies successfully navigated the dramatic sell-off in gold and other commodities, according to data released by HFR.
The HFRI Fund Weighted Composite Index gained 0.7 per cent for the month, with positive contributions from US and Japanese equity exposure, tactical commodity exposure, and falling fixed income yields globally on Bank of Japan stimulus measures and bond purchases.
Funds of hedge funds also posted a gain for the month, with the HFRI Fund of Funds Index gaining 1.1 per cent.
The HFRI Macro: Systematic Diversified CTA Index gained 2.3 per cent for the month, with positive contributions from tactical exposure to steep gold, metal and commodity declines, as well as exposure to rallying equities and fixed income trends. CTAs have been an area of performance weakness in recent years, as they produced calendar year declines in 2011 and 2012; despite this, CTAs experienced net capital inflows of USD5bn in 1Q13. Discretionary macro funds also contributed to gains for the month, with the HFRI Macro (Total) Index gaining 1.0 per cent in April.
The HFRI Relative Value Index also gained 1.0 per cent in April, the 11th consecutive gain for the Index, which has now posted gains in 45 of 52 months since December 2008. RVA gains were led by RV: Multi-Strategy and Convertible Arbitrage strategies, which gained 1.5 and 1.1 per cent, respectively. Event driven funds also produced strong gains for the month, with the HFRI Event Driven Index gaining 0.9 per cent. Event driven gains were led by equity special situations and credit arbitrage sub-strategy exposures.
The HFRI Equity Hedge Index gained 0.4 per cent for the month, leading all main strategies YTD with a gain of 5.4 per cent. Equity hedge gains were led by sector technology/healthcare and equity market neutral strategies, which gained 1.3 and 0.7 per cent for April, respectively. Partially offsetting other equity hedge gains, HFRI Short-Bias and Sector Energy/Basic Materials indices produced declines of 2.8 and 1.3 per cent for the month.
“Trend-following, quantitative macro CTAs posted their strongest monthly gain in nearly a year as equities and commodities experienced a significant divergence in April, with gold posting the sharpest two-day decline in 30 years while US equities ended the month at new record highs,” says Kenneth J. Heinz, president of HFR. “Although recent market performance has been dominated by US equity gains, both the industry-wide April gains and leadership of macro strategies underscore the robustness of the flexible multi-asset class exposure and the benefits of heterogeneous hedge fund strategy performance distribution. As the risk environment evolves, macro issues of stimulus, inflation, growth and employment will continue to drive complex relationships between asset classes and create opportunities for funds positioned to capture both trends and divergences.”