Hedge funds gained 0.99 per cent in February with underlying markets, as represented by the MSCI AC World Index (Local) up 2.72 per cent over the same period, according to EurekaHedge’s latest Index Flash Update.
On a year-to-date basis, managers gained 1.93 per cent with 11 per cent of them posting returns in excess of 5 per cent.
Among developed mandates, North American hedge funds were up 0.77 per cent, followed by European and Japanese counterparts which gained 0.46 per cent and 0.30 per cent for the month respectively. On a year-to-date basis, North American managers were up 1.78 per cent followed by Japanese and European managers who posted gains of 1.57 per cent and 1.09 per cent respectively.
All strategic mandates were up in February with distressed debt hedge funds posting the best returns, gaining 1.34 per cent, followed by event driven long/short equities hedge funds which were up 1.19 per cent per cent and 1.16 per cent respectively.
Emerging market mandates were up 1.79 per cent for the month with strength led by underlying Latin America and Asia ex-Japan mandates. Frontier markets as represented by the Eurekahedge Frontier Markets Hedge Fund Index was up 1.00 per cent for the month.
The Eurekahedge Long Short Equities Hedge Fund Index gained 1.16 per cent during the month with strength led by underlying equity long-bias hedge funds which gained 2.11 per cent over the same period.
Asia ex-Japan mandated hedge funds gained 1.42 per cent during the month with underlying Greater China and India hedge fund managers up 2.77 per cent and 2.86 per cent over the same period respectively. On a year-to-date basis, Greater China and India mandated hedge funds posted impressive gains, up 5.52 per cent and 6.64.
Among volatility-focused hedge funds, short volatility hedge funds topped the table for February, gaining 0.57 per cent while long-volatility hedge funds posted the steepest decline, down 0.88 per cent. As of 2017 year-to-date, short volatility hedge funds gained 2.04 per cent while tail risk hedge funds were down 2.96 per cent.
All regional mandates were up in February, with Latin American hedge fund managers topping the list, gaining 2.76 per cent during the month. Global equities performed well in general with US equities leading much of the strength. Emerging markets and Asia ex-Japan managers gained 1.79 per cent and 1.42 per cent over the same period, with underlying Greater China and Indian hedge fund managers gaining 2.77 per cent and 2.86 per cent respectively.
North American hedge funds were up 0.77 per cent, backed by the strong performance of US equities during the month. Despite the political instability in the European region, European hedge fund managers posted modest gains of 0.46 per cent with the DAX and CAC Index up 2.63 per cent and 2.31 per cent respectively.
Japan managers were up a modest 0.30 per cent following a late month sell-off in the Japanese equity markets from concerns of a stronger Yen. The Nikkei 225 Index ended the month with slight gains of 0.41 per cent.
On a year-to-date basis, Latin American hedge fund managers were up 6.57 per cent followed by emerging markets and Asia ex-Japan managers with gains of 4.44 per cent and 3.54 per cent respectively. The performance of Asia ex-Japan hedge funds were backed by strong performance of underlying Greater China and Indian managers who were up 5.52 per cent and 6.64 per cent over the same period.
Performance across strategic mandates were positive in February, with distressed debt hedge fund managers posting the best gains up 1.34 per cent. Performance of the high yield market was supported by a number of key factors mainly Trump's address on fiscal and monetary stimulus, encouraging US macro data, a pick-up in inflation figures as well as corporate earnings data.
The BoFA US High Yield Index was up 1.56 per cent during the month. Event driven managers gained 1.19 per cent in February followed by their long/short equities counterparts which gained 1.16 per cent over the same period. Following Trump's announcement of fiscal and tax stimulus, US equities gained strength with the DJIA breaking past the 20,000 mark at the end of the month. Global equities also rode on this wave, supporting managers' long-book trades in February. Multi-strategy and CTA/managed futures hedge fund managers posted gains of 1.06 per cent each with exposure into underlying equities and equity indices among contributors to performance.
On the FX front, gains were realised from long exposure into the USD versus other major currencies. The optimism from Trump's fiscal and tax stimulus, inflation figures and a hawkish Fed lend some support to the USD during the month. The ongoing political developments in the Euro area also resulted in gains for managers short on the Euro. Among underlying sub-strategies within the CTA/managed futures mandate, trend-following hedge fund managers posted an impressive gain of 2.56 per cent, followed by commodity and FX focused managers with gains of 0.72 per cent and 0.18 per cent respectively.
Fixed income mandated hedge funds posted gains of 0.88 per cent during the month, with gains realised from long exposure into Germany and UK fixed income instruments. Growing political instability in the European region and concerns over French elections have resulted in investors fleeing into German sovereign debt.
While yet to trigger Article 50, the UK is not entirely isolated from the developments of its European neighbours with investors increasing their demand in the Gilts as part of safe haven asset holdings. Indeed, movements within the fixed income space were backed by investor concerns amidst evolving European politics. Macro and arbitrage hedge fund managers posted modest gains during the month, gaining 0.48 per cent and 0.39 per cent respectively. Relative value mandated hedge funds were up 0.37 per cent with support by underlying short volatility hedge fund managers. This is represented by the CBOE Eurekahedge Short Volatility Hedge Fund Index, which gained 0.57 per cent during the month.
On a year-to-date basis, event driven and distressed debt hedge fund managers were up 3.27 per cent and 2.88 per cent respectively. This is followed by long/short equities and multi-strategy hedge fund managers who posted gains of 2.84 per cent and 2.30 per cent respectively. Fixed income, relative value and arbitrage mandates gained 1.80 per cent, 1.55 per cent and 0.73 per cent over the same year-to-date period. Macro and CTA/managed futures hedge funds were also up year-to-date, a modest 0.50 per cent and 0.40 per cent respectively.