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Alternative Market Briefing

Hedge funds fail to realize January expectations because of weak emerging market

Thursday, February 06, 2014

Komfie Manalo, Opalesque Asia:

The weakness in the emerging market triggered broad de-risking in January with the hedge fund industry suffering slightly negative performance last month as most of its expectations failed to realize, said investment manager GAM.

Anthony Lawler, portfolio manager at GAM said in the firm’s latest monthly insight, "In general, hedge fund managers began January broadly expecting the successful themes of the previous quarter to remain prevalent. Specifically, these themes included Japan reflation; strength in developed market equities led by U.S. growth; a continued positive event driven environment; and rising U.S. interest rates."

However, these themes failed to perform in January given the broad risk-off environment with the MSCI World index closing down 3.7% and hedge funds falling 0.3%, as measured by the HFRX Global Hedge Fund index in U.S. dollar terms. However, the index is still in positive month-to-date performance territory on 23 January.

"Many managers weathered the first three weeks of January well," said Lawler. "However, across most strategies the last two weeks of the month and the first few trading days of February were challenging. Investors globally looked to take risk off their books by selling some of their holdings in the themes that were successful in 2013. The leading detractors included the strong yen and the weak Nikkei, which hurt many g......................

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