Opalesque Industry Update - HFR's performance notes for mid December report that global financial markets posted declines, as investors discounted mixed data on consumer spending and moderate expectations for economic growth in early 2014, as global equity markets posted declines, with weakness led by Europe, Asia and Emerging Markets. |
European equity market declines were led by France, Italy, Spain, Switzerland and the Netherlands, while Asian declines were led by Australia, China, Japan, Korea & the Philippines. US weakness was concentrated in Financials, Biotechnology, Healthcare and Commodity-sensitive sectors, while Latin America declines were led by Argentina & Brazil. US yields rose as the yield curve flattened led by increases in shorter dated maturities; European yields also rose with increases across UK Gilts, German Bunds, France and the Netherlands.
Investment grade credit spreads widened, while high yield credit posted mixed performance. The US dollar also posted mixed performance, rising again the British Pound Sterling, while the Euro again topped the 1.38 level against the Dollar, breaching a 25 month high. Crude Oil & Natural Gas led gains across commodities, as Metals partially recovered steep losses from the prior month, led by gains in Copper & Platinum.
Agricultural commodity gains were led by Coffee & Cotton, with these partially offset by declines in Sugar & Wheat. Hedge funds posted declines with the HFRX Global Hedge Fund Index posting a decline of -0.48% through mid-month, while the HFRX Absolute Return Index gained +0.17%. HFRX Equity Hedge Index posted a decline of -0.48% through mid-December, with gains in Market Neutral strategies offset by declines in Fundamental managers. HFRX Market Neutral Index rose +0.70%, with gains across mean reverting and fundamental, factor-based models. HFRX Fundamental Value Index and HFRX Fundamental Growth Index declined -0.22% and -1.23%, respectively, with contributions from Emerging Asia and select European exposure, while exposure to Brazil, Global Healthcare and Consumer sectors experienced losses.
HFRX Event Driven Index posted a decline of -0.63% through mid-December, with positive contributions from Merger Arbitrage exposure offset by declines in Equity Special Situations strategies. HFRX Merger Arbitrage Index posted a gain of +0.34%, with contributions from transactions in Kroger/Harris Teeter, NYSE/Intercontinental Exchange, FNB/BCSB Bancorp, Koch/Molex and Thermo Fisher/Life Technologies. HFRX Special Situations Index declined -0.86% through mid-month from exposure to Cyclicals, Energy/Basic Materials and Financials, with core positioning in Twitter, Elan, Ferro, North American Energy, Penn West, Cole REIT, American Realty, Tribune Co., Time Warner and Life Technologies. The HFRX Distressed Index posted a modest decline of -0.06% for the period from mixed performance in various restructurings across Consumer, Technology, Industrial and Basic Materials sectors.
HFRX Macro Index posted a decline of -0.64% through mid-December, with weakness across trend-following CTA, Global Equity, Currency and Fixed Income strategies. The HFRX Macro: Systematic Diversified Index declined -0.90% with weakness across equity and fixed income exposures, while the HFRX Emerging Markets Index posted a decline of -1.09% from weakness in Brazil and Currency exposure.
HFRX Relative Value Arbitrage Index posted a decline of -0.22% through mid-December with weakness across Convertible Arbitrage and Multi-Strategy managers as yields rose and credit spreads widened. HFRX RV: Multi-Strategy Index and the HFRX Convertible Arbitrage Index declined -0.33% and -0.70%, respectively, while the HFRX Fixed Income Credit Index declined -0.30%.