Hedge funds gained in December to end 2017 with positive returns in every month, the first perfect calendar year of positive performance since 2003.
The HFRI Fund Weighted Composite Index climbed 0.9 per cent in December, topping the monthly performance of most equity markets, including the Nasdaq, Russell 2000, Nikkei 225, Shanghai Composite and France’s CAC 40.
The advance brings the FY 2017 performance to a gain of 8.5 per cent, the best calendar year performance since 2013, extending the record Index Value to 14,054, according to data released today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. Inclusive of gains in late 2016, the HFRI has advanced in 21 of the trailing 22 months, including each of the last 14 months.
Event-Driven (ED) and Equity Hedge (EH) funds led industry performance, driven in part by an improving M&A environment in Technology, Media, Healthcare, Retail and Manufacturing, as well as expectations for now-enacted comprehensive US tax reform. The HFRI Event-Driven (Total) Index advanced 1.1 per cent in December, the best monthly return since January 2017, and brought the FY17 gain to 7.3 per cent. ED performance was led by the HFRI ED: Distressed/Restructuring Index, the ED: Multi-Strategy Index, and the ED: Special Situations Index, each of which advanced 1.7 per cent, respectively, in December. For the FY17, the HFRI Event-Driven Index (Asset Weighted) advanced 8.2 per cent, topping the equally-weighted composite by 90 basis points.
The HFRI Equity Hedge (Total) Index climbed 1.0 per cent for the month, bringing FY17 performance to a gain of 13.2 per cent, the strongest calendar year since the Index returned +14.3 per cent in 2013. EH sub-strategy performance in December was led the HFRI EH: Fundamental Growth Index, which was up 1.6 per cent, bringing the FY17 return to +18.9 per cent, surging past the HFRI EH: Healthcare Index to lead all EH strategies for 2017. The HFRI EH: Fundamental Value Index advanced 1.3 per cent for the month and 13.3 per cent for the year.
Risk Parity strategies also posted strong gains in 2017, with the HFR Risk Parity Vol 15 Index gaining 2.25 per cent in December, bringing the YTD gain to 20.1 per cent. Similarly, the HFR Risk Parity Vol 10 Institutional Index gained 1.6 per cent in December and 13.5 per cent for FY17. HFR launched the Risk Parity family of Indices in August.
The newly-launched HFR Blockchain Index continued its meteoric surge with a gain of 88.5 per cent in December, bringing the FY17 parabolic return to +2,961 per cent. HFR launched the HFR Blockchain and Cryptocurrency Indices in December.
Fixed income-based Relative Value Arbitrage (RVA) and Macro hedge funds also had positive returns to conclude 2017, with the HFRI Relative Value (Total) Index gaining 0.8 per cent, while the HFRI Macro (Total) Index added 0.7 per cent for the month. RVA sub-strategy performance was led by the HFRI RV: Yield Alternatives Index, which climbed 3.3 per cent in December. For the year, the HFRI RV: FI-Asset Backed Index led sub-strategy performance with a gain of 7.6 per cent. December performance of the HFRI Macro Index was led by multi-strategy funds, as the HFRI Macro: Multi-Strategy Index advanced 1.0 per cent. For the year, Macro sub-strategy performance was led by both the HFRI Macro: Multi-Strategy Index and the HFR Macro: Currency Index, both of which gained 5.5 per cent, respectively.
“Hedge funds successfully concluded 2017 with positive HFRI performance in every month, extended the record HFRI Index Value and increased the record total industry assets throughout the year, as the US economy accelerated, global equities expanded to record levels, and investor tolerance improved,” says Kenneth J Heinz (pictured), President of HFR. “The powerful combination of surging global equity markets, dynamic M&A trends, commodity volatility and divergent interest rate cycles has created an exciting opportunity set for hedge funds coming into 2018. Developing opportunities in risk parity, blockchain and cryptocurrency trading, each of which have posted outstanding performance in 2017, are likely to further complement and contribute to record industry growth in 2018.”
