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Hedge funds extend strong start to the year led by CTA/managed futures funds as commodity prices rise

Wednesday, March 10, 2021
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was up 2.99% in February 2021 (4% YTD), outperforming the global equity market as represented by the MSCI ACWI (Local) which gained 2.72% over the same period.

Global equity markets resumed their rally in the first two weeks of February on strong earnings and economic recovery hopes, as the successful implementation of Biden's US$1.9 trillion economic stimulus package looked increasingly likely. This combined with the continued speedy rollout of vaccines across the United States led to a huge rise in risk-on sentiment, with the DJIA hitting an all-time high of 31,961.86 on 24 February 2021. Global longer tenor bond yields began to increase steadily mid-month and spiked in the final weeks as concerns around inflation began to emerge. The UK 10-year bond yield and 10-year US treasury note were up 49bp and 34 bp in February respectively, negatively impacting sentiment towards equities, leading to an equity sell-off in the final week of the month. The DJIA pared gains made in early February, losing 3.2% from the peak and ended the month at 30,932.37.

Over in Europe, returns were positive among equity benchmarks in the region with the CAC 40 and Euro Stoxx 50 taking the lead with gains of 5.63% and 4.45% respectively.

Returns were mixed across geographic mandates in February with North American and European hedge funds gaining 3.71% and 2.70% respectively while Latin American hedge funds were down 1.23%.

Across strategies, CTA/managed futures and long/short equities outperformed their strategic peers with returns of 4.12% and 3.77% throughout the month. Managers utilising CTA/managed futures strategies benefitted from the strong rise in commodity prices, driven largely by the surge in prices of Brent Crude Oil and West Texas Intermediate Crude oil of 20.06% and 20.28% respectively in February, as Saudi Arabia volunteered to cut output beyond levels previously negotiated with OPEC.

Roughly 76.1% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in February, and 12.2% of the hedge fund managers in the database were able to maintain a double digit return in 2021.



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