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Barclay Hedge Fund Index drops 2.61% in December

Thursday, January 17, 2019
Opalesque Industry Update - Hedge funds dipped 2.61% in December, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. The loss was less significant, however, than that of the S&P 500 Total Return Index, which dropped 9.03% in December.

For the year, the Barclay Hedge Fund Index was down 5.08% in 2018, while the S&P 500 Total Return Index was down 4.38% for the year.

While lowering its projections for future interest rate hikes, the U.S. Federal Reserve raised its benchmark rate a quarter-point in December. That, coupled with extreme volatility in equity markets was a major factor in December's hedge fund downturn. Other issues affecting investor sentiment were the state of the Chinese economy, which saw a 4.4% drop in exports in December, the largest such decline in two years. Meanwhile, consumer confidence fell significantly in the Eurozone in December, driven in part by a decline in industrial output in Germany.

Most of Barclay's hedge fund indices showed declines in December. Notably, Healthcare & Biotechnology dropped 7.32% while the Equity Long Bias Index was down 5.22%. The Technology Index was down 4.54% for December; the Emerging Markets Eastern European Equities Index was down 4.11% for the month, the Emerging Markets Eastern Europe Index, down 3.84%; and the Distressed Securities Index was down 3.44%.

A handful of indices - most of them emerging markets indices - posted gains in December, including the Emerging Markets Latin American Equities Index, up 0.47%; the Equity Market Neutral Index, up 0.39%; the Emerging Markets Other Index, up 0.34%; and the Emerging Markets Latin America Index, up 0.29%.

Across the board, 2018 proved a tough year for hedge funds, with the lion's share of indices showing downturns for the year. In particular, a number of emerging markets indices were down significantly, including several posting double-digit downturns; Emerging Markets Global Fixed Income Index, down 24.78%; the Emerging Markets Global Equities Index, down 13.66%; the Emerging Markets Asian Equities Index, down 13.40%; the Emerging Markets Global Index, down 11.46%; the Emerging Markets Index, down 10.98%; and the Emerging Markets Eastern Europe Index, down 10.58%.

Indices that posted gains for 2018 included the Technology Index, up 1.52% for the year; the Healthcare & Biotechnology Index, up 1.37%; the Convertible Arbitrage Index, up 0.58%; the Merger Arbitrage Index, up 0.46%; and the Fixed Income Arbitrage Index, up 0.34%.

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