Hedge funds positive again in April after robust first quarter
The Eurekahedge Hedge Fund Index was up 1.13 per cent in April, supported by the global equities which advanced on encouraging economic data and accommodative central bank policies.
Positive earnings surprises helped renew investors' optimism in the global equity market, which rallied 3.38 per cent during the month as represented by the MSCI ACWI (Local). Returns were positive across geographic mandates, with hedge fund managers focusing on North America leading the pack as they gained 1.37 per cent in April. Asian hedge funds trailed behind their peers focusing on other regions, but still managed to generate positive returns. Looking at strategic mandates, equity long-biased hedge fund managers were best positioned to benefit from the equity market performance during the month, and ended the month up 2.78 per cent.
Roughly 72.4 per cent of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in April. Fund managers utilising equity long-biased strategies maintained their place at the top with 11.72 per cent gain over the first four month of the year, while on the other end of the spectrum long volatility strategic mandate was down 8.27 per cent year-to-date as market volatilities remained suppressed throughout the year.
Aprils’ positive performance brought year-to-date gains to 5.22 per cent as global equity markets continued to advance during the month.
On an asset-weighted basis, hedge funds were up 1.46 per cent in April, as captured by the Mizuho Eurekahedge Hedge Fund Index (USD). The index was up 3.89 per cent year-to-date after registering a loss of 4.30 per cent throughout 2018.
The Eurekahedge Greater China Hedge Fund Index slumped 0.67 per cent in April despite robust economic growth over the first quarter, as concerns that authorities may scale back policy support grew over the month. The region's hedge fund industry saw US$0.9 billion of net investor allocations in 2018, despite the 12.18 per cent losses posted by fund managers during the year. On a year-to-date basis, Greater China fund managers have returned 11.12 per cent in 2019.
The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 0.93 per cent in April, bringing its year-to-date return to 2.83 per cent. Looking at the hedge fund managers comprising the index, returns were mixed. Some managers generated positive returns on the back of rising oil prices, while others ended the month in the red, dragged down by non-energy commodities.
Fund managers utilising AI/machine learning strategies ended April up 1.30 per cent, bringing their year-to-date returns to 4.24 per cent. The Eurekahedge AI Hedge Fund Index was down 5.05 per cent last year, underperforming the average hedge fund for the first time since 2012.
The Eurekahedge ILS Advisers Index slumped 0.50 per cent in April, bringing its 2019 year-to-date return to -0.11 per cent as loss creep from 2018 hurricanes continued to weigh on the performance of ILS hedge funds.
North American fund managers were up 6.73 per cent as of April year-to-date, supported by robust economic growth over the first quarter of the year, as well as accommodative central bank policies. The cautious tone of the Fed and anticipation over the US-China trade talk helped support the region's equity market since the beginning of the year. Asia ex-Japan mandate continued to rebound in April, with the Eurekahedge Asia ex Japan Hedge Fund Index up 0.55 per cent during the month and 7.86 per cent year-to-date.
Returns were mostly positive across strategic mandates in April. Long-biased equity hedge funds returned 2.78 per cent during the month, as they benefited from the strength in equity markets. On the other hand, long volatility fund managers were down 2.32 per cent as market volatilities remained suppressed throughout the month. The CTA/managed futures mandate was up 0.93 per cent in April, in contrast to how the underlying commodity strategy slumped 0.89 per cent, dragged down by the weak non-energy sector performance.