Hedge funds gained in June as the US Federal Reserve raised interest rates and oil prices extended sharp declines, while equity market volatility remained near historic lows, according to data released today by HFR.
The HFRI Fund Weighted Composite Index advanced 0.4 per cent for the month, the eighth consecutive monthly gain and the 15th gain in the last 16 months, led by strong performance in Emerging Markets, Equity Hedge and Healthcare exposures. June performance topped the Nasdaq and European equities, and brings H1 2017 performance to +3.7 per cent, also extending the record Index Value for the HFRI to 13,425.
Equity Hedge (EH) led main hedge fund strategy performance for June and H1 2017, led by exposures to Healthcare and Emerging Markets. The HFRI Equity Hedge (Total) Index advanced 1.2 per cent for the month, topping the gain of the S&P 500 and bringing H1 2017 performance to +6.2 per cent, which exceeds the full-year returns of each of the three prior calendar years. The HFRI EH: Healthcare Index surged 4.9 per cent in June, the strongest monthly advance since September 2016, and led all sub-strategy indices for H1 2017 with a +10.7 per cent return.
The HFRI EH: Fundamental Growth and EH: Fundamental Value Indices each advanced 1.3 per cent in June, with these gaining 9.4 and 6.0 per cent, respectively, for H1 2017. The HFRI Emerging Markets (Total) Index surged 2.0 per cent in June and 10.5 per cent for H1 2017, driven by strong contributions from the HFRI EM: MENA Index which jumped 6.0 per cent in June, as well as the HFRI EM: Asia ex-Japan Index, which advanced 3.3 per cent for the month.
Led by Activist strategies, the HFRI Event-Driven (Total) Index advanced 0.7 in June, bringing its H1 2017 return to +4.3 per cent. The HFRI ED: Activist Index gained 1.3 per cent in June and 4.2 per cent for H1 2017, with contributions from positions in Whole Foods, Nestle and General Motors. For H1 2017, ED sub-strategy performance was led by the HFRI ED: Special Situations Index, which gained 1.1 per cent in June and 5.4 per cent in H1 2017.
Fixed income-based Relative Value Arbitrage (RVA) strategies advanced for the 16th consecutive month as the US Federal Reserve raised interest rates, with the HFRI Relative Value (Total) Index advancing 0.3 per cent for June and 2.9 per cent for H1 2017. RVA sub-strategy performance for June was led by the HFRI RV: Convertible Arbitrage Index, which gained +0.9 per cent for the month and +3.5 per cent for H1 2017. The HFRI RV: Fixed Income-Asset Backed Index led RVA sub-strategies in H1 2017 with a 4.6 per cent return.
Macro strategies declined in June and H1 2017 as implied volatilities remained near historic lows, though Currency strategies extended strong recent performance. The HFRI Macro (Total) Index fell 1.0 per cent for the month and 0.8 per cent for H1 2017, with negative contributions from quantitative, trend-following CTA strategies. The HFRI Macro: Systematic Diversified Index declined 2.2 per cent in June, bringing the H1 2017 decline to 2.8 per cent. Partially offsetting these losses, the HFRI Macro: Currency Index advanced 0.3 per cent in June, bringing H1 2017 performance to +6.8 per cent, with contributions from the falling US Dollar, as well as digital currencies.
“Hedge funds posted another positive month in June as implied volatility across many assets and regions remained near historic lows, with the recent string of positive performance approaching a significant historical context. For the broad-based HFRI, June marked the eighth consecutive positive month for the first time since the period ending April 2011 and the first time the Index had 15 out of 16 consecutive monthly gains since the period ending April 2004,” says Kenneth J Heinz (pictured), President of HFR. “Managers have effectively adapted to the current low interest rate, low volatility environment, while remaining focused on catalysts for an inflection point in implied volatility, strategically and tactically positioned to navigate possible near term shifts.”
