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Hedge funds enter 2017 on positive note with 0.84% gains

Wednesday, February 15, 2017
Opalesque Industry Update - Hedge funds started the year on a positive note, up 0.84% during the month of January. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 1.49% over the same period.

Among regional mandates, Latin American hedge fund managers topped the tables, gaining 3.47% while event driven managers posted the best returns, up 1.95% among strategic mandates. Financial markets were still hinged on the developments post-Trump win with US equity markets trading higher at the start of January on the back of encouraging US macro data. The flow of economic data from major economies outside of the US has also signalled an encouraging outlook on the global economy. However, this still has to be taken with a pinch of salt as we are yet to see the full impact of Trump's protectionist policies on America's trade partners. While there are understandable jitters on an "America First" rhetoric, Trump could be treading political sensitivities too precariously.

The Eurekahedge 50 Index, an annually rebalanced index comprising of 50 elite hedge funds with strong risk-adjusted returns and combined AUM of almost US$150 billion has been rebalanced for annual year 2017 and the new list of index constituents can be accessed here. The Eurekahedge 50 Indexwas up 4.33% in 2016, outperforming the average billion dollar hedge fund by almost 200 basis points during the year.

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

- Hedge funds gained 0.84% in January with underlying markets, as represented by the MSCI AC World Index (Local) up 1.49% over the same period. Over the past year, hedge funds were up 4.54% with managers posting eight consecutive months of gains since February 2016. Close to one-quarter of hedge fund managers posted double digit returns for annual year 2016.

- Among developed mandates, North American hedge funds were up 1.05%, followed by Japan and European mandated hedge funds which gained 0.75% and 0.57% respectively for January. Over the past year, North American hedge funds managers topped 2016 returns among developed mandates (+7.74%) while Europe and Japan managers posted modest gains.

- Among strategic mandates, event driven hedge funds posted the best January 2017 returns, gaining 1.95%, followed by long/short equities and distressed debt hedge funds which were up 1.65% and 1.52% respectively.

- Emerging market mandates were up 2.41% for the month with strength led by underlying Latin America and Eastern Europe/Russia mandates. Frontier markets, as represented by the Eurekahedge Frontier Markets Hedge Fund Index was up 2.12% for January.

- The Eurekahedge CTA/Managed Futures Hedge Fund Index declined 0.65% for the month with underlying trend-following hedge funds leading much of the weakness, down 1.17% over the same period. Underlying FX-focused managers were down 0.49% while their commodity-focused peers gained 1.03%.

- Asia ex-Japan hedge funds started 2017 on a positive note, up 1.79% for the month with strength led by underlying Greater China focused funds which gained 2.16% over the same period. India focused hedge funds were also positive with a 4.60% increase during the month. Over the past year, Asia ex-Japan managers struggled to eke out gains and were up a marginal 0.08% with performance dragged by Greater China focused funds which were down 4.09%.

- Among volatility-focused hedge funds, short volatility hedge funds posted the best performance for January, gaining 1.66%, followed by relative value volatility hedge funds which gained 0.59% over the same period. Over the past year, relative value volatility focused hedge funds posted the best gains, up 7.38% followed by short volatility focused managers who were up 5.27%.

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