Hedge funds extended their gains for the year and were up 0.92 per cent during the month of July according to preliminary figures released by EurekaHedge. Underlying markets meanwhile, as represented by the MSCI AC World Index (Local), were up 1.64 per cent over the same period.
On a year-to-date basis, managers gained 4.32 per cent while underlying markets were up 9.41 per cent.
EurekaHedge writes: “Returns were largely positive across the board with all key regional mandates in the green with emerging market mandates excluding Eastern Europe & Russia delivering the best returns. The US economy continues to march along at a steady pace, with a weakening USD and the gain in oil prices spurring inflation expectations and making a stronger case for a Fed rate hike later this year.
“However, the political deadlock in Congress; where President Trump still appears to have his hands tied to push through with his reform agenda (the recent sanctions against Russia which Trump approved quite begrudgingly being a recent case in point); as well as the upcoming fiscal debt ceiling are likely to force the Fed to pursue its rate hike more cautiously in the second half of 2017.
“Over in Europe, the growth momentum appears to be going strong with a strengthening Euro adding to gains for foreign investors in the region. Emerging markets (EM) led by India, China and Brazil have also contributed to strong gains for hedge fund managers as global risk appetite remains strong with a weakening USD favouring exposure to EM markets where valuations remain relatively cheap.”
Among developed market mandates, Japanese hedge funds led on a year-to-date basis with gains of 5.63 per cent, followed by European hedge funds up 4.25 per cent and North American hedge funds up 3.39 per cent.
Among strategic mandates, equity long bias hedge funds led on a year-to-date basis, gaining 9.81 per cent, followed by event driven hedge funds posting a return of 6.65 per cent and multi-strategy hedge funds with 6.39 per cent.
Emerging market mandates continue to outshine their developed market peers, with India, Greater China and Asia ex-Japan hedge funds witnessing gains of 19.08 per cent, 18.22 per cent and 12.37 per cent respectively. Latin America and Eastern Europe mandated funds were also up 11.06 per cent and 4.03 per cent for the year.
Performance across fund sizes has varied, with mid-sized hedge funds (USD100 million to USD500 million) gaining 4.55 per cent year-to-date – outperforming their billion dollar peers by almost 185 basis points for the year.
The Eurekahedge AI/Machine Learning Hedge Fund Index was up 5.89 per cent for the year, outperforming traditional quant hedge funds which were down 0.36 per cent for the year.
CTA/managed futures strategies dropped 1.95 per cent for the year, with commodity focused hedge funds dipping 1.77 per cent while FX focused strategies are up 1.99 per cent.