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HEDGE FUNDS GAIN FOR SIXTH CONSECUTIVE MONTH AS VOLATILITY FALLS
Energy, Activist strategies lead as Oil surges; HFRI tops MSCI World Index YTD
CHICAGO, (September 8, 2016) – Hedge funds advanced in August, topping the mixed performance of US equities as financial market volatility and trading volume declined. Led by a resurgence in Energy/Basic Materials and Activist strategies, the HFRI Fund Weighted Composite Index® (FWC) gained +0.4 percent for the month, increasing the Index Value to 12,709 and bringing YTD performance to +3.5 percent, as reported today by HFR®, the established global leader in the indexation, analysis and research of the global hedge fund industry.
After posting losses in the first two months of the year, the HFRI FWC has now produced gains in six consecutive months. The HFRI Asset Weighted Composite Index advanced +0.4 percent for the month, bringing YTD performance to +0.5 percent. Event-Driven (ED) strategies led industry performance in August, driven by strong contributions from Activist and Distressed strategies. The HFRI Event-Driven Index advanced +1.8 percent for the month, bringing YTD performance to +6.0 percent, the leading area of strategy performance. Shareholder Activist strategies surged for the second consecutive month, as the HFRI ED: Activist Index added +3.7 percent in August, following a gain of +3.1 percent in July. Distressed strategies also saw strong gains for the month, as the HFRI ED: Distressed Index advanced +2.1 percent, bringing YTD performance to +8.1 percent, the leading area of ED sub-strategy performance. The HFRI Event-Driven (Asset Weighted) Index gained +2.6 percent in August.
Equity Hedge strategies also posted strong monthly gains, led by Energy & Basic Materials exposures, with the HFRI Equity Hedge Index advancing +1.3 percent, bringing the YTD gain to +3.4 percent. The volatile HFRI EH: Energy/Basic Materials Index jumped +3.4 percent in the month as Oil surged, leading sub-strategy performance for both August and YTD; the Index has gained +16.7 percent in 2016. The HFRI Fundamental Value Index advanced +1.7 percent in August, while HFRI EH: Multi-Strategy Index added +1.6 percent.
Fixed income-based Relative Value Arbitrage (RVA) strategies also posted gains in August despite little change in both government and corporate high yield credit. The HFRI Relative Value Index advanced +0.8 percent in the month, bringing YTD performance to +4.9 percent, as ultra-low and negative interest rates extended through mid-year. RVA sub-strategy performance was led by exposure to corporate bonds, as the HFRI RV: FI-Corporate Index gained +1.4 percent, bringing the YTD return to +8.2 percent. The HFRI RV: Yield Alternative Index advanced +1.2 percent in the month and leads RVA sub-strategy performance YTD with a gain of +12.5 percent. The HFRI RV: Convertible Arbitrage Index also added +1.3 percent for the month and is up +5.4 percent YTD.
The HFRI Macro (Total) Index declined -1.6 percent in August, led by declines in quantitative, trend-following CTA strategies, paring the YTD gain to +2.0 percent; the HFRI Macro Index (Asset Weighted) posted a decline of -1.0 percent in August. CTA’s experienced declines across positions in Energy, which gained in a strong reversal from the prior month, as well Fixed Income strategies. The HFRI Macro: Systematic Diversified Index declined -2.9 percent in August, paring the YTD gain to +2.1 percent. Fundamental and Discretionary Macro strategies were little changed for the month, as the HFRI Currency Index declined -0.30 percent and the HFRI Commodity Index fell -0.4 percent, while the HFRI Discretionary Thematic Index gained +0.4 percent.
“Specialized strategies across Event Driven and Equity Hedge, including Energy-focused, Distressed and Shareholder Activist posted strong gains to lead hedge fund performance in August as Oil surged while global equities, interest rates and high yield credit were essentially unchanged for the month,” stated Kenneth J. Heinz, President of HFR. “In an environment dominated by demands for ultra-liquidity, a common performance theme is each of these leading strategies captures a liquidity premium over an intermediate timeframe by leveraging both fundamental and transactional specializations. Sophisticated investors and institutions which are able to assume these risks are likely to continue generating strong performance through 2H16.”
Comments reference Flash Update performance figures as posted on September 8, 2016.