Opalesque Industry Update - Global financial markets closed the first half of 2014 with gains across most regions in June, as implied volatilities fell sharply on improving economic growth concentrated in developed markets. Equity markets gained across most sectors and regions, with US sector gains led by Commodity sensitive, Oil Services, Technology and Biotechnology, with strong performance concentrated in small cap and growth names, though large-, mid-cap and value also gained for the month. |
European and Asian equities posted mixed performance, with European gains across Spain, Russia and the Netherlands offset by declines across France, Italy, Germany and the UK. Similarly, Asian gains were led by Japan & Thailand, with China posting a modest gain while Australia and Singapore declined. Gold, Silver and other metals posted sharp increases for the month as oil sustained early month gains on increased Middle East geopolitical tensions. Agricultural commodities experienced a volatile month on unexpected US weather patterns, with large gains in Hogs, Cattle and Lumber offset by sharp declines in Wheat, Corn & Cotton. Interest rates rose on improving economic conditions in US & Europe, with the US yields rising as the curve flattened on increases in shorter dated yields; European yields were mixed with increases across UK Gilts offset by declines across Germany, France, Spain and Italy.
The US dollar declined across the board for the month of June, posting sharp declines against the British Pound Sterling, New Zealand Dollar and Russian Ruble, while posting more modest declines against the Euro, Yen, Brazilian Real and Canadian Dollar. Hedge funds posted gains for the month of June, with the HFRX Global Hedge Fund Index gaining +0.93%, the HFRX Market Directional Index posted a gain of +2.02%.
HFRX Event Driven Index gained +1.57% for the month of June, with positive contributions from Distressed/Restructuring and Equity Special Situations strategies; the Index leads all hedge fund strategies with a YTD gain of +4.42%. HFRX Distressed Index gained +2.28% in June, the largest gain since January 2012, leading all ED substrategies for the year with a gain of +6.68%. HFRX Distressed had contributions from restructurings across Communications, Financials, Energy and Consumer sectors in the US.
HFRX Special Situations Index posted a gain of +1.38%, with contributions from core positioning in American Realty, Hertz, Forest Labs, Covidien, Diamond Resorts, and Athabasca Oil. HFRX Merger Arbitrage Index gained +0.16% for the month, with mixed contributions from transactions in Hillshire /Pinnacle Foods, GE/Alstom, Actavis/Forest Labs and Tower Financial/Old National Bancorp.
HFRX Equity Hedge Index posted a gain of +1.52% for the month of June, with positive contributions from Fundamental Growth, Value and Market Neutral strategies. HFRX Fundamental Growth Index posted a gain of +3.69%, its second largest monthly gain since February 2012, with contributions from exposure to Global Healthcare, Emerging Asia and small-cap US equities. HFRX Fundamental Growth leads EH substrategies for 2014 with a gain of +5.33%. HFRX Fundamental Value Index gained +0.70% with contributions from Communications, Financials and Industrials, while HFRX Market Neutral Index gained +0.42%, with gains across factor-based models and fundamental and trading oriented strategies.
HFRX Relative Value Arbitrage Index posted a gain of +0.29% for the month of June, with contributions from Fixed Income and Credit Multi-Strategy exposures. The HFRX Fixed Income Credit Index gained +0.56% with contributions from Distressed, Corporate Credit and Emerging Markets strategies, while the HFRX Multi-Strategy Index posted a gain of +0.39% with positive contributions from Global Fixed Income, Corporate Credit and Equity strategies. HFRX MLP Index gained +6.28% for the month, its largest gain since January 2013, bringing the 1H14 gain to +16.7%, driven by continued demand for yield generating energy infrastructure partnerships.
HFRX Macro Index posted a gain of +0.08% for the month of June, with positive contributions from Emerging Markets and Discretionary Global strategies. The HFRX Emerging Markets Composite Index posted a gain of +1.89%, with gains concentrated in Asian equity exposure. HFRX Macro: Systematic Diversified Index posted a gain of +0.06%, with mixed contributions from fixed income, equity and currency exposures. Macro Discretionary strategies posted gains with contributions from emerging markets and European exposures, which were only partially offset by global fixed income strategies.