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Alternative Market Briefing

Hedge funds mitigate losses from Brexit’s 'intense volatility'

Wednesday, June 29, 2016

Komfie Manalo, Opalesque Asia:

Hedge fund managers navigated intense volatility as the historic Brexit vote resulted in massive dislocations across global currency, equity, commodity and fixed income markets, with positioning across the British pound sterling, equities and gold mitigated losses, Hedge Fund Research said in its latest report.

The HFRX Absolute Return Hedge Fund Index posted a decline of -0.18% on Friday, while the HFRX Equal Weighted Index fell -0.76%. The HFRX Global Hedge Fund Index posted a decline of -1.06% on Friday, with gains in CTA strategies offset by declines in equity hedge strategies; macro and relative value arbitrage strategies experienced mixed performance on said day.

"Many hedge funds were defensively positioned coming into the Brexit vote, reflecting expectations for a close popular vote as well as the systemic risks associated with a surprise result, which was heightened by gains in sterling and equity markets leading into the vote," stated Kenneth J. Heinz, president of HFR.

Brexit caused massive dislocations

The report said the decision of the UK to leave the European Union caused massive dislocations most specifically in the sterling, which posted a steep decline against the U.S. dollar and Japanese yen. Hedge fund performance was mixed across strategies with wide dispersion and high turnover, as losses across directional beta strategies were ......................

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