Asset prices rallied across equities, bonds, credit and most commodities in June. Hedge funds performed positively with the HFRX Global Hedge Fund index up 0.9 per cent for the month.
The four main hedge fund strategies also posted gains, as measured by the respective HFRX strategy indices in US dollar terms.
Hedge funds increased their investment levels in June as markets normalised following the equity market rotations in March through to early May, according to GAM portfolio manager Anthony Lawler.
“Hedge funds are generally bullish on the opportunity set and that is reflected in their gross exposure increases, while net market exposure remains stable,” says Lawler. “Equities and credit are hitting all-time highs in price terms in some regions, and many managers view this as an opportune time to express long and short ideas rather than simply being directionally long.
“We expect the current investment themes to continue into the second half of the year. Our view is positive given the supportive backdrop of global central bank liquidity and reasonable growth rates. Investors’ reach for yield continues to drive opportunities in relative value and credit, while the event driven strategy remains strongly supported by the volume of merger deals coming to market which is expected to continue. Within equities, we have seen managers adding to positions in Europe, Japan and the US. Finally, in traditional macro markets we are seeing opportunities as a result of differing country growth and policy paths, so managers are trading long sterling, long US dollar versus the yen and the euro, tactical longs in European and Japanese equities, and country-specific ideas in emerging markets such as long Brazilian interest rates where disappointing growth may result in rate cuts.”
At the half-year mark event driven was the top-performing strategy, followed by relative value and equity hedge strategies with year-to-date performance of 4.4 per cent, 1.6 per cent and 1.3 per cent respectively, as measured by the HFRX strategy indices in US dollar terms. The global macro strategy was positive in June but remains the laggard in year-to-date performance terms (-0.7 per cent) as managers largely wait for their themes to play out, says Lawler.
