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Equity markets started the month on a positive note, supported by the de-escalation of the tension in the Middle East, and the signing of the US-China phase-one trade deal.

The S&P 500 and the tech-heavy NASDAQ returned 1.97% and 2.29% respectively for the week ending January 17. However, market sentiment shifted quickly towards the end of the month, following the coronavirus outbreak in China.

Investors feared that the epidemic, which draws parallel to the SARS outbreak in 2003 might significantly weigh on the global economic outlook. The Shenzhen and Shanghai benchmarks were down 8.45% and 7.72% on February 3, after the onshore markets reopened following the Chinese New Year holiday.

The two market benchmarks partially recouped their losses over the following few days thanks to the liquidity injection introduced by the PBOC, as well as the tariff reduction on US imports.

Over in Europe, the FTSE 100 ended January down 3.40%, underperforming other European equity markets as strong British pound weighed on UK equities. Returns were mixed across geographic mandates in January.

Despite the weak performance of the equity markets in the region, fund managers focusing on Asia ex-Japan were up 1.29%, outperforming their North American and European peers who were down 0.30% and 0.24%, respectively.

Japanese hedge funds lost 2.00% over the month of January, underperforming their regional peers. Across strategies, CTA/managed futures, fixed income and distressed debt fund managers were up 0.76%, 0.74%, and 0.61% respectively throughout the month.

Roughly 58.7% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in January, and 37.6% of the hedge fund managers in the database were able to end 2019 with double-digit returns.

Key highlights for the month of January 2020

Hedge fund managers were up 0.17% in January, despite the uncertainties surrounding the 2019 novel coronavirus which contributed to the weak global equity market performance during the month. The MSCI ACWI (Local) was down 0.90% over the same period.

On an asset-weighted basis, hedge funds were down 0.28% in January, as captured by the Mizuho Eurekahedge Hedge Fund Index (USD). The index was up 6.97% throughout 2019.

The Eurekahedge North American Hedge Fund Index slumped 0.30% during the month, despite the positive geopolitical developments surrounding the US-China trade war and robust corporate earnings result in the region.

The Eurekahedge Greater China Long Short Equities Hedge Fund Index was down 0.40% in January, as concerns over the impact of the coronavirus outbreak on China's economic outlook weighed on the region's equity markets. Equity fund managers focusing on Greater China ended 2019 up 14.77%.

Hedge fund managers utilising fixed income strategies were up 0.74% in January, as market risk aversion supported the global government bond market during the month. The Eurekahedge Fixed Income Index ended 2019 up 7.85%.

Fund managers utilising AI/machine learning strategies returned 2.18% in January. The Eurekahedge AI Hedge Fund Index was up 6.53% in 2019.

The Eurekahedge Crypto-Currency Hedge Fund Index was up 20.49% in January, supported by the strong performance of Bitcoin which ended the month up 31.63%. Fund managers focusing on crypto-currencies gained 16.41% in 2019.

Regional Indices

North American fund managers were down 0.30% in January. The gains of the equity market in the region driven by the development of the US-China trade progress and strong corporate earnings were substantially offset by the losses caused by the concerns surrounding the coronavirus outbreak.

Over in Asia, fund managers with Asia ex-Japan investment mandate ended the month up 1.29%, while the Japan-focused hedge funds ended the month down 2.00%.

Strategy Indices

Returns were mixed across strategic mandates in January with AI and long volatility mandates up 2.18% and 1.11% respectively, as the latter were supported by the heightened market volatility throughout the latter half of the month.

Fixed income managers were also up 0.74%, as global government bonds rallied over the month. Meanwhile, equity long bias managers were down 0.49% in January, contrary to they topped the table with 16.73% return over 2019.