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Aussie hedge funds outperform local equity market in May

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May was undoubtedly a difficult month on global equity and commodity markets, and Australia’s were no exception. The ASX 200 lost over 2.3% having been down over 5% at one stage, but in spite of this the Absolute Return and Hedge Fund sector continued to protect investors’ capital. With 60% of results received to date the average fund, whilst negative, has outperformed the local equity market by close to 2%, and the S&P 500 by 1%.

The overall themes that emerged when looking at Managers’ May performance reports were ongoing concerns over the pace (or lack thereof) of the US recovery, continuing concerns over Greek and European debt, and continuing concerns over the sustainability of China’s growth.

The fact that the words ongoing and continuing occur multiple times when describing each of these issues is indicative that the jury is still out. When looking at managers’ reports there seems to be an expectation that these conditions will continue for the foreseeable future.   

Against this the best performing managers in AFM’s database of over 240 funds continue to produce encouraging results, not only protecting capital but producing positive returns with significantly lower volatility.

On the negative side, high conviction managers with concentrated portfolios tended to suffer as increasing volatility and relatively low turnover in falling markets took their toll.

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