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Hedge funds off to a rough start in 2016, down 0.91% in January

Wednesday, February 10, 2016
Opalesque Industry Update - January puts a spotlight on Asia as developments in East Asian economies along with a tumbling oil price took centre stage and sent ripples throughout Asia and beyond with the MSCI World Index1 declining 5.71% during the month. Hedge funds also reflected the sluggish situation and were off to a weak start to the year with the Eurekahedge Hedge Fund Index down 0.91%2 in January as volatility in the equity markets dominated trading throughout the month. Concerns over the health of the Chinese economy also added to the bleak market outlook during the month; however a cold spell in the US took some heat off China following a brief recovery in oil prices. Meanwhile the BOJ caught the markets by surprise in late January by announcing negative interest rates - this followed a dismal start to the year for Japanese equities with the Nikkei 225 declining 7.96% during the month. The overall uncertainty in the markets led to a flight to safety which saw capital going into traditional safe havens – the Bund and the JGB saw record low yields as a result of the confluence of macroeconomic developments.

Key takeaways for the month of January 2016:

Hedge funds were down 0.91% during the month though outperforming underlying markets as the MSCI World Index3 declined 5.71% over the same period.

All regional mandates posted negative returns during the month, with Asia-focused hedge funds posting the steepest decline - Asia ex Japan hedge funds were down 3.30% followed by Japan hedge funds which were down 2.44%.

Greater China investing hedge funds posted their first month of losses since August 2015 and were down 5.98% in January with its long/short equity heavyweight declining 6.24% as Chinese equity markets came under pressure during the month. The CSI 300 declined 21.04% over the same period.

Long short equities hedge funds posted losses during the month - down 2.80%. Across regional mandates, Asian long/short equities hedge funds performed the worst, down 3.24% over the same period.

Event driven funds have posted the worst monthly return among all hedge fund strategic mandates, down 3.45% - their worst performance on record since 2011. Meanwhile CTA/managed futures managers have posted the strongest gains during the month, up 2.50% helped by short positions in Asia equity futures and energy.

The CBOE-Eurekahedge Tail Risk Hedge Fund Index posted the best gains among the suite of CBOE-Eurekahedge Volatility Indices – up 3.53% as stock market volatility dominated trading during the month.

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