Hedge funds dipped 2.61 per cent in December, according to the Barclay Hedge Fund Index compiled by BarclayHedge. The loss was less significant, however, than that of the S&P 500 Total Return Index, which dropped 9.03 per cent in December.
For the year, the Barclay Hedge Fund Index was down 5.08 per cent in 2018, while the S&P 500 Total Return Index was down 4.38 per cent for the year.
While lowering its projections for future interest rate hikes, the U.S. Federal Reserve raised its benchmark rate a quarter-point in December. That, coupled with extreme volatility in equity markets was a major factor in December’s hedge fund downturn. Other issues affecting investor sentiment were the state of the Chinese economy, which saw a 4.4 per cent drop in exports in December, the largest such decline in two years. Meanwhile, consumer confidence fell significantly in the Eurozone in December, driven in part by a decline in industrial output in Germany.
Most of Barclay’s hedge fund indices showed declines in December. Notably, Healthcare & Biotechnology dropped 7.32 per cent while the Equity Long Bias Index was down 5.22 per cent. The Technology Index was down 4.54 per cent for December; the Emerging Markets Eastern European Equities Index was down 4.11 per cent for the month, the Emerging Markets Eastern Europe Index, down 3.84 per cent; and the Distressed Securities Index was down 3.44 per cent.
A handful of indices – most of them emerging markets indices – posted gains in December, including the Emerging Markets Latin American Equities Index, up 0.47 per cent; the Equity Market Neutral Index, up 0.39 per cent; the Emerging Markets Other Index, up 0.34 per cent; and the Emerging Markets Latin America Index, up 0.29 per cent.
Across the board, 2018 proved a tough year for hedge funds, with the lion’s share of indices showing downturns for the year. In particular, a number of emerging markets indices were down significantly, including several posting double-digit downturns; Emerging Markets Global Fixed Income Index, down 24.78 per cent; the Emerging Markets Global Equities Index, down 13.66 per cent; the Emerging Markets Asian Equities Index, down 13.40 per cent; the Emerging Markets Global Index, down 11.46 per cent; the Emerging Markets Index, down 10.98 per cent; and the Emerging Markets Eastern Europe Index, down 10.58 per cent.
Indices that posted gains for 2018 included the Technology Index, up 1.52 per cent for the year; the Healthcare & Biotechnology Index, up 1.37 per cent; the Convertible Arbitrage Index, up 0.58 per cent; the Merger Arbitrage Index, up 0.46 per cent; and the Fixed Income Arbitrage Index, up 0.34 per cent.
