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HFR Kenneth J Heinz

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Hedge fund performance mixed in September

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Hedge funds posted mixed performance for September as US bonds yields increased, with strategy gains led by fixed income- based Relative Value Arbitrage, while Macro Currency led sub-strategy performance as the US Dollar gained against the Japanese Yen.

The HFRI Fund Weighted Composite Index fell 0.2 per cent in September, with declines in Equity Hedge exposures offsetting positive contributions from credit and interest rate- sensitive Relative Value Arbitrage strategies, as reported today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. Larger hedge funds topped the performance of smaller funds for the month, with the HFRI Asset Weighted Composite Index posting a narrow decline of 0.05 per cent.
 
September strategy performance was led by the HFRI Relative Value (Total) Index, which advanced 0.5 per cent, bringing the YTD return to +3.2 per cent. RVA sub-strategy performance was led by Sovereign bond and Asset Backed exposures, as the HFRI RV: Sovereign Index gained 1.5 per cent, while the HFRI RV: Asset Backed Index added +0.8 per cent. Bank Risk Premia strategies with exposure to credit and currency surged for the month, with the HFR BSRP Credit Multi-Style Index jumping 9.43 per cent, while the HFR BSRP Currency Value Index vaulted 10.53 per cent.

 
Event-Driven (ED) fixed income exposure was mixed, however, as the HFRI ED: Distressed Index declined 0.17 per cent in September, while the HFRI Credit Arbitrage Index posted a narrow gain of 0.10 per cent. M&A-sensitive ED exposures were also mixed for the month, with the HFRI ED: Merger Arbitrage Index advancing 0.3 per cent, while the HFRI ED: Activist Index fell 2.2 per cent. The overall HFRI Event-Driven (Total) Index posted a narrow decline of 0.05 per cent for the month.
 
The HFRI Macro (Total) Index also posted narrow declines in September, with the Index falling 0.3 per cent, as gains in Currency and Discretionary Thematic strategies were offset by declines in systematic CTAs and Emerging Markets. Macro sub-strategy performance was led by the HFRI Macro: Currency Index, which jumped 3.0 per cent, and the HFRI Macro: Discretionary Thematic Index, which advanced 1.1 per cent. The HFRI Macro: Systematic Diversified Index declined 1.3 per cent in September, while the HFRI Emerging Markets (Total) Index fell 0.75 per cent, despite pressure on regional EM equities and currencies subsiding over the month.
 
The HFRI Equity Hedge (Total) Index declined 0.4 per cent despite gains in Technology and Multi-Strategy exposures in September. The HFRI EH: Technology Index advanced 0.45 per cent, while the HFRI Multi-Strategy Index gained 0.3 per cent for the month. These gains were offset by weakness in Fundamental Growth and Energy-focused funds, as the HFRI EH: Fundamental Growth Index fell 1.2 per cent, while the HFRI EH: Energy/Basic Materials Index lost 0.8 per cent. The volatile HFR Cryptocurrency Index gained 1.7 per cent for the month.
 
“Financial market risk increased across a wide continuum in September, including rising US interest rates associated with accelerating economic growth, rising Italian bond yields and EU budget uncertainty, regulatory risk and record valuations in US technology equities and ongoing political uncertainty over both trade and social policies. Each of these risks, which have accelerated into October, has contributed to increased risk of contagion and increased prospect for near term volatility or major dislocations across asset markets,” says Kenneth J Heinz (pictured), President of HFR. “Mixed hedge fund performance in September reflects these increases in risks, including not only defensive, hedged positioning but also fluid expectations for opportunities created or to be created by such dynamic developments. These trends are likely to continue to drive industry performance through the fourth quarter and into 2019.”
 

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