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Emerging market hedge funds outperformed their developed market counterparts in May

Wednesday, June 09, 2021
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was up 1.10% in May 2021, supported by the robust performance of the global equity market as represented by the MSCI ACWI (Local) which gained 0.83% over the same period.

Headline inflation rose to 4.2% year on year in April, the highest level since September 2008 and caused concerns among investors that this could prompt the Federal Reserve to tighten monetary policy. Despite the higher inflation figure, the Federal Reserve has signalled that interest rates will be increased only after the economy has made rapid progress toward the committee's goals.

The S&P 500 and DJIA recorded new all-time highs in the first week of May and ended the month with gains of 0.55% and 1.93% respectively, supported by the strong economic momentum as reflected in the composite purchasing managers' index (PMI) which rose to a record high of 68.1 in May. Over in Europe, returns were positive among equity benchmarks in the region with the CAC 40 and DAX Index taking the lead with gains of 2.83% and 1.88% respectively.

European equities were supported by the rising vaccination rates in Europe, which helped to increase the prospects for a strong economic rebound. Returns were positive across geographic mandates in May with emerging markets and Asia ex-Japan hedge funds gaining 1.88% and 1.73% respectively while Japanese hedge funds were up 0.35%.

Across strategies, macro and CTA/managed futures outperformed their strategic peers with returns of 1.79% and 1.54% respectively throughout the month.

Below are the key highlights for the month of May 2021:

Hedge fund managers were up 1.10% in May, supported by the strong performance of the global equity market which returned 0.83% during the month. In terms of 2021 performance, global hedge funds were up 7.96%, recording the strongest May year-to-date return since 2009 despite the ongoing pandemic. Around 80.4% of the constituents of the Eurekahedge Hedge Fund Index generated positive returns in 2021.

On an asset-weighted basis, hedge funds were up 1.56% in May, as captured by the Eurekahedge Asset Weighted Index - USD. In terms of 2021 performance, the index is up 5.00%, recording their best May year-to-date return since 2009.

The Eurekahedge North American Hedge Fund Index was up 1.07% in May, outperforming the S&P 500 and NASDAQ which returned 0.55% and -1.53% respectively. In terms of 2021 performance, North American hedge funds have returned 10.42%, outperforming their regional peers as the continued speedy roll out of COVID-19 vaccinations enabled the reopening of more industries and boosted the momentum of the economic recovery.

The Eurekahedge Emerging Markets Hedge Fund Index was up 1.88% in May, outperforming their developed market counterparts as emerging markets equities benefitted from the 1.57% decline of the US Dollar Index in May. In terms of 2021 performance, emerging markets funds have returned 5.40%, lagging behind their developed market counterparts as North American and European hedge funds returned 10.42% and 5.77% over the same period respectively.

The Eurekahedge Macro Hedge Fund Index gained 1.79% in May, recording their best monthly return in 2021. The Federal Reserve signalled their intent to consider tightening monetary policy only after the economy has made significant progress towards a strong recovery, allaying fears that interest rates would be raised prematurely. In terms of 2021 performance, the index returned 5.47% - recording their highest May year-to-date return since 2009.

The Eurekahedge CTA/Managed Futures Hedge Fund Index returned 1.54% in May, supported by the robust performance of the S&P GSCI Index which returned 2.52%. Precious metals were the best performing components of the S&P GSCI Index, with Gold and Silver returning 7.66% and 8.28% in May respectively. In terms of 2021 performance, the index returned 6.47% - recording the third highest May year-to-date return among the main strategic mandates, trailing behind event driven and long short equities which returned 10.49% and 9.92% respectively.

Fund managers focusing on cryptocurrencies were down 2.25% in May as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, outperforming Bitcoin which lost 32.88% over the same period. In terms of 2021 return, cryptocurrency hedge funds gained 137.63%, outperforming Bitcoin which returned 24.27% over the first 5 months of the year.

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