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HFRI Equity Hedge (Total) Index up 0.74% in November (+2.64% YTD)

Monday, December 08, 2014
Opalesque Industry Update - Macro hedge funds and, more specifically, CTA strategies employing quantitative, trend-following strategies, posted strong gains in November as oil prices plummeted and the US Dollar extended gains against other currencies, as reported by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. The HFRI Macro Index gained +2.6 percent in November, powered by a gain of +4.6 percent for the HFRI Macro: Systematic Diversified/CTA Index; both the Macro and CTA Index gains were the strongest since December 2010. The HFRI Fund Weighted Composite Index® gained +1.2 percent for the month, reversing a two-month decline for the broad-based Index, bringing year-to-date (YTD) performance through November to +3.7 percent. All four main strategy areas tracked by HFR posted gains for the month.

Strong performance in Macro and CTA strategies was driven by persistent and powerful trends across Commodity, Currency, Equity and Fixed Income markets. Oil plunged more than 17 percent in November, losing over 10 percent in the final trading day of the month, driven by a combination of moderating global demand and, specifically, the announcement that OPEC would maintain, rather than reduce, current output targets; oil has declined nearly 33 percent for 2014. In addition to participating in the large move in oil, Macro hedge funds also posted gains across Currency positions, as the US Dollar saw sharp gains against the Japanese Yen, British Pound Sterling and oil-sensitive currencies, including the Russian Rouble and Brazilian Real. The HFRI Macro: Currency Index gained +1.3 percent in November, while the HFRI Macro: Active Trading Index gained +3.0 percent and the Macro: Multi-Strategy Index returned +3.0 percent. The gain in the HFRI Macro: Systematic Diversified/CTA Index brings YTD 2014 performance for the Index to +10.0 percent, the strongest year since the Index gained +18.1 percent in 2008. Likewise, the gain for the HFRI Macro (Total) Index lifted YTD performance to +5.7 percent, the strongest since 2010 and moving Macro to lead all strategies areas YTD. Prior to 2014, both Macro and CTA strategies had posted three consecutive calendar year declines.

Event Driven equities recovered from a two-month period of volatility with the announcements of large transactions, totaling greater than $100 billion in the same day, lifting the HFRI Event Driven (ED) Index to a gain of +1.2 percent for the month. ED performance was led by event-equity sensitive strategies with the HFRI ED: Special Situations Index gaining +1.6 percent in November, while the HFRI ED: Multi-Strategy Index gained +2.7 percent.

Fixed Income-based Relative Value Arbitrage strategies also posted gains for the month, with the HFRI Relative Value Arbitrage Index up +0.3 percent, bringing the YTD gain to +4.5 percent. RVA gains were led by Volatility and Credit Multi-Strategies, with the HFRI RV: Volatility Index up +2.0 percent in November, while the HFRI RV: Multi-Strategy Index was up +1.1 percent.

Equity-focused hedge funds also posted gains for the month, but these were partially offset by weakness in Energy and Emerging Markets equities. The HFRI Equity Hedge Index gained +0.7 percent in November, led by gains in Equity Market Neutral and Technology/Healthcare. The HFRI Equity Market Neutral Index advanced +2.1 percent, the strongest monthly return for the characteristically low volatility strategy since December 2000. Similarly, the HFRI EH: Technology/Healthcare Index was up +1.6 percent for the month, bringing YTD performance for the Index to +7.7 percent, the leading EH sub-strategy. The HFRI EH: Energy/Basic Materials Index posted a sharp decline of -5.9 percent in November, the third consecutive decline for the Index, bringing the three-month drawdown to -15.0 percent. The HFRI EM: Russia/Eastern Europe Index declined -9.1 percent in November, bringing the YTD loss for the Index to -23.0 percent, and contributing to a November decline of -0.8 percent for the HFRI Emerging Markets (Total) Index.

"Trend-following Macro strategies posted strong gains for November with significant contributions from short oil and long US Dollar positions, vaulting Macro & CTA strategies into performance leadership positions for 2014 and rewarding investors which have remained committed to these classic, sophisticated alternative strategies over the past few years," stated Kenneth J. Heinz, President of HFR. "In addition to Macro, Event Driven strategies are expected to benefit from the continued growth and fundamental normalization of the US economy. As the macroeconomic divergence between the US, Europe and Asia continues to expand into 2015, flexible, tactical strategies which are able to adapt to fluid developments in commodity and currency markets and position investors to benefit from these powerful dynamics are likely to attract investor capital."
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