In line with the broader hedge fund market, Alternative UCITS funds profited from the rising volatility in fixed income and equity markets towards the end of the month. The LuxHedge Global Alternative UCITS index advanced with +0.93 per cent, the largest monthly gain since October of 2015.
January is an especially interesting month to look at asset flows since most large institutions revise their strategic asset allocations. With fixed income yields at historical lows and elevated equity valuations, investors are increasingly looking for alternative return streams. Allocations to Alternative UCITS funds grew considerably and Assets under Management for the total universe advanced with 12BEUR (AUM +2.6 per cent).
Investors increased their exposure to many liquid alternative strategies, most notably to explicit portfolio diversifiers such as Alternative Risk Premia (AUM +9 per cent) and CTA & Managed futures funds (AUM +5 per cent). Many investors also chased the double digit 2017 performance of Equity Long/Short Asia UCITS who enjoyed an asset increase of 8 per cent in January.
Performance for Alternative UCITS funds was positive across almost all strategies with over 75 per cent of funds posting a positive return.
Increased dispersion among equities benefited all Equity Hedge strategies with the LuxHedge Equity Long/Short Global index advancing 1.28 per cent in January. Long/Short funds focussing on Asia continued their very steep upward path, advancing 3.47 per cent for the month. Given strong liquidity positions of corporate balance sheets and a more business friendly regulatory and fiscal policy environment, Merger Arbitrage and Event driven funds also posted gains again: LuxHedge Event Driven UCITS Index: +1.04 per cent.
Continuing where they left off second half of 2017, CTA funds posted an exceptionally strong month: LuxHedge CTA Managed Futures Index +3.42 per cent. Also discretionary Global Macro funds benefitted from rising fixed income and equity volatility, advancing +0.94 per cent in January.