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Hedge funds managers record moderate returns as global equity market rallies

Tuesday, December 08, 2020
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was up 4.50% in November 2020, supported by the strong performance of the global equity market as represented by the MSCI ACWI (Local) which gained 11.63% over the same period. Global equities ended the month in strong positive territory due to the relatively smooth conclusion of the US presidential election and the announcement of three vaccines that are effective against COVID-19, eclipsing worries about the near-term economic outlook.

Despite the reimposition of restrictive lockdown measures across many European countries to curb the increasing number of new COVID-19 infections, European stock indices rallied strongly as news of the better than expected efficacy of several vaccine candidates led to optimism that the worst of the pandemic could soon be over.

The FTSE 100 and DAX Index rebounded strongly in November, gaining 12.35% and 15.46% respectively, reversing the steep losses suffered in October when they lost 4.92% and 9.44% respectively.

Over in the US, the successful election of Joe Biden as the 46th president of the United States drove a risk-on mood in markets as investors looked forward to greater certainty and a more diplomatic and multilateral approach in foreign policy matters.

The better than expected news on COVID vaccine development added fuel to the post-US election rally with the DJIA and S&P500 ending November with a gain of 11.84% and 10.75% respectively.

Returns were positive across geographic mandates in November with the Eurekahedge North American Hedge Fund Index outperforming their regional peers with a 5.89% gain. Across strategies, long/short equities, event driven and relative value fund managers were up 6.39%, 5.49% and 5.01% respectively throughout the month.

Roughly 81.15% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in November, and 16.47% of the hedge fund managers in the database were able to maintain double-digit returns over the first 11 months of 2020.

Below are the key highlights for the month of November 2020:

Hedge fund managers were up 4.50% in November, underperforming the global equity market as represented by the MSCI ACWI (Local) which generated 11.63% return throughout the month. On a year-to-date basis, global hedge funds were up 8.23%, with around 71.7% of its underlying constituents having underperformed the global equity market over the first 11 months of 2020.

Billion-dollar hedge funds were up 1.92% during the month, underperforming their smaller peers with small, medium and large hedge funds gaining 4.68%, 5.53% and 2.28% respectively.

On an asset-weighted basis, hedge funds were up 4.23% in November, as captured by the Eurekahedge Asset Weighted Index - USD. The index is only up 1.63% year-to-date, highlighting the struggles for some of the larger asset managers this year.

The Eurekahedge Greater China Hedge Fund Index was up 3.47% in November, outperforming the Shenzhen Composite Index which was up 2.35% in November. On a year-to-date basis, the Greater China mandates are up 25.66% over the first 11 months of the year, outperforming their global peers by a substantial margin.

Hedge fund managers utilising long/short equities strategies were up 6.39% in November, outperforming their major strategic peers over the month for the second consecutive month, with arbitrage and relative value hedge funds up 1.96% and 5.01% respectively. On a year-to-date basis, hedge fund managers utilising long/short equities strategies also consistently outperformed their peers as they gained 11.73%, compared to arbitrage and relative value hedge funds which generated a return of 8.43% and 7.78% respectively.

The Eurekahedge Structured Credit Hedge Fund Index was up 3.48% during the month, extending its eight-month trailing return to 21.97% since end-March. In terms of year-to-date return, structured credit hedge funds were down 4.87% as of November 2020, underperforming their fixed income and distressed debt peers who returned 3.71% and -0.66% respectively.

Fund managers focusing on cryptocurrencies were up 20.55% in November as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, underperforming Bitcoin which was up 33.45%. On a year-to-date basis, cryptocurrency hedge funds have also underperformed Bitcoin, gaining 119.35% as compared to Bitcoin which returned 149.81% over the first 11 months of 2020.

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