Hedge funds posted mixed performance in June as trade tensions increased around fluid tariff negotiations and proposals, while the US Federal Reserve increased interest rates and M&A activity remained strong.
The HFRI Fund Weighted Composite Index (FWC) declined -0.46 per cent for the month, as gains in Event-Driven strategies were offset by declines in Equity Hedge, Relative Value and Macro strategies, according to data released today by HFR, the established global industry leader in the indexation, analysis and research of the global hedge fund industry. The June decline for the HFRI FWC pares its H1 2018 gain to 0.8 per cent, topping the DJIA and most regional global indices, including the DAX, CAC 40, FTSE 100, Nikkei 225, Shanghai Composite and MSCI World Indices.
Bank Risk Premia strategies also posted mixed performance for June in the first month of performance since HFR launched the HFR Bank Systematic Risk Premia Indices, with gains concentrated in Currency and Interest Rate strategies.
HFRI FWC gains were led by the HFRI Event-Driven (Total) Index, which advanced 0.9 per cent for the month as speculative activity in Media and Telecom sectors accelerated. The June gain increased H1 2018 performance for HFRI ED to +2.4 per cent, leading all main strategy indices. For the month, ED sub-strategy gains were led by the HFRI ED: Activist Index, which gained 2.8 per cent, while the HFRI ED: Merger Arbitrage Index and HFRI ED: Distressed Index added 1.2 and 1.0 per cent, respectively. For H1 2018, ED sub-strategy gains were led by HFRI ED: Activist Index, which gained 2.8 per cent.
ED June gains were offset by a decline of 0.9 per cent in the HFRI Equity Hedge (Total) Index, which pared its YTD return to +1.2 per cent. EH sub-strategy gains were led by the HFRI EH: Healthcare Index and HFRI EH: Technology Index, with these advancing 1.3 and 0.4 per cent, respectively, in June. For H1 2018, the HFRI EH: Healthcare led all EH sub-strategies with a +9.9 per cent return.
In their first month since launch, the HFR Bank Systematic Risk Premia Index family was led by Currency and Interest Rate strategies, as the US Federal Reserve increased interest rates. The HFR Bank Systematic Risk Premia Rates Index gained 1.5 per cent in June, while the HFR Bank Systematic Risk Premia Currency Index gained 1.3 per cent. Within these strategies, the sub-strategies of Momentum, Multi-Strategy and Volatility posted the strongest advances.
The fixed income-based HFRI Relative Value (Total) Index posted a narrow decline of 0.1 per cent for June, paring its H1 2018 gain to 1.6 per cent, as the US Federal Reserve increased interest rates and Rates Risk Premia strategies advanced. RVA sub-strategy gains were led by the HFRI RV: Yield Alternatives Index, which advanced 0.5 per cent for the month. Risk Parity strategies declined in June, with the HFR Risk Parity Vol 10 Index falling 1.2 per cent and the HFR Risk Parity Vol 15 Index falling 1.5 per cent.
Macro strategies posted mixed June performance across both fund size and sub-strategy, as declines in CTA, Currency and Commodity strategies were only partially offset by gains in Discretionary Thematic strategies. The HFRI Macro (Total) Index declined 0.3 per cent in the month, though larger Macro funds gained for the month, with the HFRI Macro Index (Asset Weighted) gaining 0.4 per cent for the month.
“Hedge fund performance was mixed for June as trade-tariff volatility spiked, with Event-Driven and Technology strategies extending gains to conclude a strong H1 2018, while the overall HFRI topped declines on most European, Asian and global equities, as well as the DJIA, for H1 2018,” says Kenneth J Heinz (pictured), HFR President. “Trade-tariff equity volatility has increased concurrent with strong US earnings at the same time that the US yield curve flattened and the Fed increased rates, creating additional pressure on non-US equities. These trade-centric macroeconomic drivers are likely to accelerate through H2 2018, inclusive of upcoming meetings between US and Russia, contributing to a fluid environment and increased opportunity set for long/short investing across multiple asset classes globally. Funds which have demonstrated ability to navigate this environment are likely to drive performance & growth in H2 2018.”