Hedge funds extended 2017 gains through November, driven by ongoing US economic growth and significant merger and acquisition (M&A) activity, according to data released by HFR.
The HFRI Fund Weighted Composite Index® gained +0.5 per cent in November, led by Equity Hedge and Special Situations funds, marking the 13th consecutive monthly advance and bringing YTD performance to +7.5 per cent. The gain extends the record Index Value for the HFRI to 13,926.
Equity Hedge (EH) funds led all main strategies in November as the HFRI Equity Hedge (Total) Index advanced 1.1 per cent, bringing YTD performance to +12.1 per cent. EH sub-strategy performance was led by the HFRI EH: Healthcare Index, which climbed 2.1 per cent for the month and leads all EH sub-strategies YTD with a +17.9 per cent return. The HFRI EH: Quantitative Directional Index and HFRI EH: Fundamental Value Indices also produced strong November returns, adding 1.5 and 1.2 per cent, respectively. In addition to M&A, EH strategies have also recently increased exposures to ESG factors, which is expected to continue into 2018.
Event-Driven (ED) hedge funds advanced as corporate M&A activity accelerated through November and into December with large transactions at various stages of completion. These include AT&T/Time Warner, Qualcomm/Broadcom, and CVS/Aetna, with additional speculative activity involving 20th Century Fox, Google, Amazon, Facebook, Apple, Nvidia, Disney, Comcast and General Electric. The HFRI Event-Driven (Total) Index advanced 0.1 per cent for November, bringing YTD performance to +6.1 per cent. ED sub-strategy performance was led by the HFRI ED: Special Situations Index, which jumped 1.5 per cent for the month, extending YTD performance to +10.8 per cent, leading ED sub-strategies for 2017. The HFRI ED: Credit Arbitrage Index added 0.3 per cent in November, bringing the YTD return to +6.0 per cent.
Fixed income-based Relative Value Arbitrage (RVA) and Macro strategies posted mixed performance for the month, with the HFRI Relative Value (Total) Index up 0.05 per cent, while the HFRI Macro (Total) Index declined 0.2 per cent. The HFRI RV: Volatility Index led RVA sub-strategy performance in November, gaining 0.8 per cent, while the HFRI RV: Sovereign Index advanced 0.5 per cent. Currency and Commodity exposures both detracted from Macro performance for the month, as the HFRI Currency Index fell 1.5 per cent and the HFRI Commodity Index declined 0.3 percent. Risk Parity funds also gained in November, with the HFR Risk Parity Vol 10 Index gaining 0.6 per cent for the month, bringing YTD performance to +11.9 per cent.
“Hedge funds gained in November as M&A activity accelerated with investors and managers positioning for transformative impacts across retail, media, manufacturing, distribution and financial industries,” says Kenneth J Heinz (pictured), President of HFR. “Performance was also driven by positive developments regarding US tax reform, as well as improving expectations for near-term economic growth and optimism for additional strength into 2018. It is likely that these favourable trends will continue to drive industry growth through year end.”
