Kenneth Heinz, HFR

Hedge funds gain on tech and quant exposures


Hedge funds posted strong, broad-based gains in June, with multiple and varied drivers of performance leading advances across a wide range of strategies. The HFRI Fund Weighted Composite Index gained +2.6 per cent for the month, the strongest month since January, increasing the Index Value to 14,408, a record level.

 The June gain recovers the decline from the prior month and brings 2019 performance to +7.6 per cent.

The HFRI 500 Fund Weighted Composite Index, an investible index of 500 leading hedge funds, returned +1.9 per cent for June. Liquid Alternatives also advanced in June, as the HFRI-I Liquid Alternative UCITS Index added +1.3 per cent for the month, led by the HFRI-I Liquid Alternative UCITS Relative Value Index which returned +1.55 per cent.

HFRI performance was led by Equity Hedge (EH) strategies, with the HFRI Equity Hedge (Total) Index gaining +3.2 per cent, also the strongest month since January, bringing YTD 2019 performance to +9.4 per cent. All EH sub-strategies advanced for the month, led by Quantitative, Growth and Technology exposures. The HFRI EH: Quantitative Directional Index gained +3.9 per cent for the month, while HFRI EH: Fundamental Growth Index advanced +3.9 per cent and HFRI EH: Technology Index jumped +4.0 per cent.

Macro strategies also posted strong returns in June, with the HFRI Macro (Total) Index advancing +2.5 per cent, the strongest month since January 2018, with strong performance across both quantitative and fundamental strategies. Quantitative, trend-following funds led Macro sub-strategy performance with the HFRI Macro: Systematic Diversified Index advancing +2.93 per cent for the month, while the HFRI Macro: Discretionary Thematic Index returned +2.91 per cent and the HFRI Macro: Active Trading Index added +2.88 per cent.

Risk Premia and Risk Parity strategies also posted strong gains as risk on sentiment re-emerged after the May decline, led by Credit & Multi-Asset strategies. Risk Parity gains were led by equity and fixed income, with the HFR Risk Parity Volatility 15 Index gaining +8.0 per cent. The HFR BSRP Credit Index advanced +13.1 per cent for June, while the HFR BSRP Multi-Asset Index surged +13.5 per cent. In credit, HFR BSRP Credit Momentum Index surged +17.5 per cent for June. Rates strategies posted strong gains in June, with the HFR BSRP Rates Index Rates Index gaining +3.23 per cent, led by the HFR BSRP Rates: Momentum Index which gained +8.84 per cent on the month, bringing the 2019 gains to +24.77 per cent. In equities, Equity Volatility gained +3.57 per cent as volatility declined. Performance in commodity strategies was mixed, led by the with the HFR BSRP Commodity Volatility Index gaining +6.7 per cent, The HFR BSRP Trend Following Index gained +4.9 per cent for June, while the HFR BSRP Multi-Asset Momentum surged +16.49 per cent on the month, bringing the 2019 gain to +32.15 per cent.

Event-Driven (ED) and Relative Value (RV) also gained for the month, led by Activist and Corporate exposures. The HFRI Event-Driven Index advanced +2.0 per cent for the month, led by the HFRI ED: Activist Index, which surged +5.0 per cent. Fixed income-based Relative Value Arbitrage strategies also gained for the month with the HFRI Relative Value (Total) Index advancing +1.2 per cent, led by the HFRI RV: Corporate Index, which returned +1.9 per cent.

Cryptocurrency funds extended the May surge in June as many underlying currencies advanced on the announcement of Facebook’s Libra cryptocurrency, with the HFR Cryptocurrency Index vaulting +14 per cent for the month, bringing the YTD 2019 return to +82.4 per cent.

“Hedge funds posted broad-based gains to conclude the strongest first half of a calendar year, with varied and wide range of leadership including equity, technology, M&A-focused, trend-following, quantitative and blockchain/cryptocurrency exposures,” says Kenneth J Heinz, President of HFR. “The HFRI recovered performance declines from the prior month as the oscillating pattern of risk on/risk off sentiment reverted back to risk on, with constructive developments on trade negotiations providing a strong tailwind for performance gains. It is likely that the W-shaped equity market pattern will continue throughout 2H19, with funds tactically positioned to benefit from opportunities presented leading industry performance and growth.”

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