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CTAs and Macros shine in October as hedge funds continue winning streak

Tuesday, November 14, 2017
Opalesque Industry Update - Hedge funds gained 1.32%1 during month of October. Meanwhile underlying markets, as represented by the MSCI AC Word Index (Local), gained 2.56% over the same period. Roughly 77% of the underlying constituent hedge funds for the Eurekahedge Hedge Fund Index were in positive territory this month thanks to a broad-based rally in global equity markets and an improving investor risk appetite. Asia ex-Japan managers led the performance among regional mandates this month, and were up 2.76% while CTA/managed futures managers topped the table across strategies, gaining 2.73% over the same period.

The trading scene in October was affected by a series of macro data, central bank announcements, OPEC and to a lesser extent the passage of Trump's tax reform and choice of next Fed chair. Geopolitical tensions surrounding Iraq and expectation of an extensive OPEC production cuts led to some support for oil prices. Investor optimism remained buoyed as the Trump administration's proposed tax reforms made some progress in the Senate. While lacklustre inflation data remains a concern for a possible rate hike in December, strong macroeconomic data in US could put the central bank on track for its next rate hike.

However, given the impact of the hurricane seasons on US economy this year, macroeconomic data could likely surprise on the downside, in which case it will be interesting to see if the Fed can follow up on its resolve to normalize rates. In the Eurozone and elsewhere in the world, economic data for Q3 2017 was largely encouraging with indicators pointing towards global economic expansion. Over in Japan, Abe's expected election victory pushed Japanese stocks to all-time high with Nikkei 225 rallying sharply on expectations of continuity in Abe's economic and monetary policies.

Below are the key highlights for the month of October 2017:

• Hedge funds gained 1.32% in October with underlying markets, as represented by the MSCI AC World Index (Local), up 2.56% over the same period. On a year-to-date basis, managers gained 6.99% while underlying markets were up 14.84%.

• The Eurekahedge Trend Following Hedge Fund Index, a sub-group of the broad CTA Index outshone in October, was up 4.86% during the month as wi

nning trends in equities, base metals and energy contributed positively to performance. • Asia ex-Japan mandates led the gains in 2017 year-to-date, up 18.22%, with Greater China and India mandated hedge funds were up 26.34% and 23.80% respectively.

• Among developed mandates, Japanese hedge funds gained 1.86%, followed by European and North American counterparts which were up 0.55% and 0.22% for the month respectively. On a year-to-date basis, Japanese managers were up 10.87% followed by European and North American managers who posted gains of 6.61% and 4.58% respectively.

• All strategic mandates were up this month with CTA/managed futures hedge funds posting the best returns of 2.73%, followed by macro and multi-strategy hedge funds gaining 1.94% and 1.46% respectively.

• Long/short equities hedge funds were up 0.98% in October with equity long bias hedge funds posting an impressive 1.39% gain, boosted by the broad-based rally in the global equity markets during the month.

• Among volatility-focused hedge funds, short volatility hedge funds topped the table for October, gaining 0.55%, while long-volatility hedge funds posted a declined, down 0.79%. On a year-to-date basis, short volatility hedge funds gained 8.12% while long volatility hedge funds were down 9.65% year-to-date.

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