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HFRX Global Hedge Fund Index fell -0.75% in December (-0.58% YTD)

Wednesday, January 07, 2015
Opalesque Industry Update - Financial markets concluded 2014 with mixed performance in December, as Oil plunged to extend sharp declines of the previous month. Energy commodities posted sharp declines, led by both Oil and Natural Gas; Aluminum and Coffee also declined across other commodities. Global equities posted mixed declines for the month, with Energy and Commodity sensitive exposures leading sector losses, Technology, Financials and Consumer sectors were narrowly changed for the month while small caps advanced.

European and Emerging Markets declines were led by sharp declines in Russia and Brazil, Italy, France, Germany and Spain also posted declines; Asian equities also declined with the exception of China, which concluded the year with a sharp gain. The US treasury yield curve flattened as yields on longer dated maturities fell while yields on shorter maturities rose; US 10 year yields were little changed for the month.

European yields fell in anticipation of stimulus measures from the ECB, resulting in a decline in the Euro (to a 2 and a half year low) versus the US Dollar; the Dollar gained against most currencies for the month, including the Russian Ruble, Swiss Franc, Brazilian Real and Mexican Peso. Hedge funds posted declines for December as Macro gains failed to offset RVA declines, with the HFRX Market Directional Index declining -0.18% for the month; the HFRX Global Hedge Fund Index posted a decline of -0.75% for December.

HFRX Macro/CTA Index posted a gain of +0.34% for December, the 8th straight month of positive performance, and leading all strategies for 2014 ending with a gain of +5.24% YTD, it's best performance in 6 years. The HFRX Macro: Systematic Diversified/CTA Index gained +1.04% ending the year with a gain of +3.16%, it's best yearly performance in 4 years, as Energy continued to fall and the US Dollar extended gains against all major currencies while the Russian Ruble partially recovered from previous lows. Macro Discretionary managers posted gains partially offset by currency strategies.

HFRX Equity Hedge Index posted a decline of -0.54% for December, ending the year with a gain of +1.42%, the 3rd consecutive year of positive performance, with positive contributions from Market Neutral, Fundamental Growth and Global Healthcare exposure partially offset by declines in Emerging Markets strategies. The HFRX Market Neutral Index was basically unchanged for the month posting a +3.63% gain for the year, its best yearly performance in 8 years, with performance gains from quantitative, trading oriented strategies and Fundamental, factor-based models. The HFRX Fundamental Value Index declined -0.24% for the month, +0.59% YTD, with gains in European strategies, US large cap offset by exposure to Japan, Financials and Cyclical sectors. The HFRX Fundamental Growth Index posted a decline of -1.30% and gaining +3.44% YTD, with contributions from Global Healthcare and US small cap equity offset by Asian and Latin American exposure.

HFRX Event Driven Index posted a decline of -0.47% for December, ending the year with a decline of -4.06%. December's performance was driven by Merger Arbitrage managers, while special situations equities and distressed/restructuring strategies experienced declines. The HFRX Merger Arbitrage Index gained +0.35%, +2.19% YTD, with contributions from transactions in TriQuint/RF Micro Devices, BB&T/ Susquehanna Bancshares, Becton Dickinson/CareFusion and Protective Life/ Dai-ichi Life. The HFRX Special Situations Index posted a decline of -0.31% from core positioning in American Realty, Comcast, Time Warner, Innophos, Athabasca Oil, Covidien and Medtronic. The HFRX Distressed Index posted a decline of -1.00%, with contributions from restructurings in Energy, Basic Materials and Industrial sectors in the US.

HFRX Relative Value Arbitrage Index posted a decline of -2.04% for December, -3.14% YTD, as the yield curve flattened and high yield credit spreads widening, with declines in corporate credit, convertible arbitrage and yield alternative strategies. The HFRX Multi-Strategy Index and the HFRX Convertible Arbitrage Index posting declines of -2.26% and -0.97%, respectively.

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