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Hedge funds advanced in August as global equities rallied driven by the dovish stance of the Federal Reserve

Tuesday, September 14, 2021
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was up 0.80% in August 2021, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 2.45% over the same period. Despite persistent concerns over the spread of the Delta variant and inflation, global equities were supported by the dovish comments from Federal Reserve chairman Jerome Powell made at the Jackson Hole symposium.

Powell acknowledged that the US economy had made progress on some key economic indicators such as inflation and unemployment but said that tapering may start at year's end only if there is substantial further progress in the economic recovery. This boost to sentiment provided strong support to US equities with the S&P 500 and NASDAQ gaining 2.90% and 4.00% respectively. Over in Europe, returns were positive among equity benchmarks in the region with the Euro Stoxx 50 taking the lead with a gain of 2.62%.

Despite a rise in COVID-19 infections, the high vaccination rate in most large eurozone countries have enabled their governments to avoid costly lockdowns and keep their economies largely open. Returns were mostly positive across geographic mandates in August with Eastern Europe & Russia hedge funds leading the group with a return of 2.55% while emerging markets and Latin American hedge funds trailed behind their regional peers with returns of -0.05% and -0.99% respectively. Across strategies, event driven and long/short equities outperformed their strategic peers with returns of 1.17% and 1.02% respectively throughout the month.

Key highlights for the month of August 2021:

Hedge fund managers were up 0.80% in August, supported by the strong performance of the global equity market as represented by the MSCI ACWI (Local) which gained 2.45% during the month. In terms of 2021 performance, global hedge funds were up 8.61%, recording the strongest August year-to-date return in over a decade. Around 35.0% of the global hedge funds captured by the Eurekahedge database generated double-digit positive returns in 2021.

On an asset-weighted basis, hedge funds were flat in August, as captured by the Eurekahedge Asset Weighted Index - USD. In terms of 2021 performance, the index is only up 3.76%, highlighting the underperformance of larger asset managers compared to their smaller peers over the year.

The Eurekahedge North American Hedge Fund Index was up 0.79% in August, underperforming US equities as reflected in the 2.68% return of the MSCI North America Index AC (Local). On a year-to-date basis, North American fund managers were up 11.98%, recording their best August 2021 YTD performance since 2009.

The Eurekahedge Indian Hedge Fund Index was up 5.98% in August, supported by the strong performance of the underlying equity market in the region, with the NIFTY 50 gaining 8.69% over the same period. In the same vein, Indian hedge funds recorded their longest winning streak, with their 15th consecutive month of positive return since end-May 2020. The mandate generated an accumulated return of 71.28% over the last 15 months while recording a year-to-date return of 26.26% as of August 2021.

Event-driven and long/short equities hedge funds posted returns of 1.17% and 1.02% respectively, outperforming their strategic peers over the month. The two strategic mandates benefitted from the strong run of global equities during the month as reflected by the recorded 2.90% return of the S&P 500. On a year-to-date basis, event driven and long/short equities were up 11.11% and 10.61% respectively, outperforming all of their strategic peers with the distressed debt mandate being the only exception.

Fund managers focusing on cryptocurrencies were up 23.59% in August, bringing their year-to-date return to 145.77%. The cryptocurrency market recovered from its low in July led by Bitcoin which rallied to the $50,000 level and ended the month with an 11.33% return. On a year-to-date basis, cryptocurrency hedge funds gained 145.77%, strongly outperforming Bitcoin's 63.35% return over the first eight months of the year.

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