In line with the broader hedge fund market, the average Alternative UCITS fund showed negative performance in Q1. The LuxHedge Global Alternative UCITS index declined by 0.56 per cent in March, bringing 2018 YTD to -0.69 per cent.
Most Alternative UCITS funds went down because of a small long equity bias. To put things in perspective, the MSCI Europe Index stood at -4.17 per cent YTD by the end of March.
In view of increased market volatility and declines in equities globally, portfolio allocations to Alternative UCITS funds grew considerably. Assets under Management for the total universe advanced with EUR12 billion to EUR460 billion (+2.5 per cent). Investors mainly have an appetite for portfolio diversifying strategies such as Alternative Risk Premia (AUM +12 per cent), Multi Asset Absolute Return (AUM +14 per cent) and Discretionary Macro funds (AUM +12 per cent). The relatively small segment of Long/Short Thematic funds also keeps gaining in popularity with investors, growing from EUR2.1 billion to EUR2.4 billion during Q1 2018 (AUM +10 per cent).
Performance for Alternative UCITS funds was negative across almost all strategies with only 10 per cent of funds in positive territory for 2018 YTD.
Within Equity Hedge strategies, Equity Long/Short funds did not overcome the negative effect of their long equity bias in Q1 2018: the LuxHedge Equity Long/Short Index has lost 0.61 per cent YTD. Equity Market Neutral Funds avoided the drawdown in equities and are flat for the year on average: 0.01 per cent YTD. This space is very diverse though with the best Market Neutral fund returning well over 6 per cent YTD.
After a strong start in January, Event Driven and Merger Arbitrage funds are also in slightly negative territory. The LuxHedge Event Driven & Merger Arbitrage UCITS Index is down 0.37 per cent YTD.
The performance of Discretionary Macro funds was very mixed in Q1 2018 with YTD performance varying between -4 per cent and +4 per cent for the 46 constituents of the index. On average, performance was flat, with th LuxHedge Discretionary Macro UCITS Index down 0.12 per cent YTD. After a very solid month of January, performance of CTA funds declined in February and March, across Trend followers, Short term traders and CTA Diversified Quant strategies. The LuxHedge CTA & Managed Futures UCITS Index is down 2.69 per cent YTD.
Alternative Risk Premia UCITS was the only strategy to show a slightly positive performance in March with the LuxHedge Alternative Risk Premia UCITS Index up 0.19 per cent (YTD -1.29 per cent).
