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HEDGE FUNDS ADVANCE ON POLITICAL, ECONOMIC TRENDS
Event-Driven hedge funds are top-performing category, led by Activist strategies; Tech, Emerging Markets drive Equity Hedge gains
CHICAGO, (May 5, 2017) – Hedge funds extended 2017 gains in April, as managers positioned for upcoming European elections and investors reacted to progress on new tax and healthcare legislation, according to data released today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.
The HFRI Fund Weighted Composite Index® (FWC) climbed +0.59 percent in the month, extending the record Index Value to 13,348.32, the fifth consecutive monthly record. The HFRI FWC advanced for the sixth consecutive month and has posted gains in 13 of the last 14 months. The April gain brings YTD performance to +3.09 percent. The HFRI Asset Weighted Index added +0.23 percent for the month, extending its YTD return to +2.18 percent.
April performance was led by Event-Driven strategies, with top contributions from Activist funds with exposures to General Motors, Honeywell and Whole Foods. The HFRI Event-Driven (Total) Index advanced +0.84 percent for the month, reversing a small March decline and bringing YTD performance to +2.91 percent. The HFRI ED: Activist Index led sub-strategy performance for the month with a +2.03 percent return, its strongest gain since December. The HFRI ED: Merger Arbitrage Index climbed +1.1 percent for April, while the HFRI ED: Distressed/Restructuring Index added +0.53 percent.
Equity Hedge strategies also posted positive returns in April, with contributions from Technology and Emerging Markets offsetting weakness in Energy exposures. The HFRI Equity Hedge (Total) Index advanced +0.81 percent for the month, the twelfth gain in the last 14 months, and extended its YTD return to +4.75 percent. Technology exposures led EH sub-strategy performance for the second consecutive month, with the HFRI EH: Technology Index up +2.13 percent. The April gain brings YTD performance of the Tech Index to +6.92 percent, topping the return of the DJIA and Russell 2000 for both April and YTD. Emerging Markets exposures also had a strong contribution to April performance in EH, with the HFRI Emerging Markets (Total) Index gaining +1.57 percent, bringing YTD performance to +7.81 percent. All EM regions advanced in the period, led by the HFRI EM: MENA Index and the HFRI EM: Latin America Index, which jumped +3.11 and +1.69 percent, respectively.
Fixed income-based Relative Value Arbitrage strategies advanced as US yields were little changed for April despite a rate increase by the US Federal Reserve and continued expectations for additional near-term increases in 2017. The HFRI Relative Value (Total) Index was up +0.47 percent for the month, the fourteenth consecutive monthly gain, led by exposures to volatility and corporate bonds. The HFRI RV: Volatility Index returned +1.12 percent, as implied and realized volatilities declined across asset classes on favorable political and economic developments. The HFRI RV: FI-Corporate Index gained +0.81 percent in April, as US yields posted only a modest increase while high yield spreads were little changed; the HFRI RV: FI-Asset-Backed Index added +0.30 percent for the month.
Macro strategies posted a narrow gain for April, with a strong contribution from Currency exposures offset by weakness in Commodity strategies. The HFRI Macro (Total) Index was up +0.20 percent for the month, bringing YTD performance to a narrow gain of +0.12 percent. The HFRI Macro: Currency Index jumped +2.37 percent in April, leading all sub-strategies for the period. Partially offsetting this gain, the HFRI Macro: Commodity Index declined -0.79 percent for the month. The HFRI Macro: Systematic Diversified Index returned +0.22 percent in April, while the HFRI Macro: Discretionary Thematic Index added +0.13 percent.
“Hedge funds extended recent performance gains in April, driven by a combination of factors, including optimism with regard the upcoming election in France, development of powerful shareholder activist campaigns, favorable outlooks for the Trump administration proposals on tax reform and healthcare, and expectations for steady, calculated US interest rate increases in 2017,” stated Kenneth J. Heinz, President of HFR. “Each of these developing trends coincides with an outlook for performance drivers which are likely to continue to develop through mid-year 2017. Managers which are correctly and dynamically positioned for these trends are likely to lead industry performance and growth in coming months.”
Comments reference Flash Update performance figures as posted on May 5, 2017.