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Global financial markets extended gains in December to conclude a strong and volatile 2020, as investors focused on continued rising coronavirus cases, rollout of several vaccines and the resolution of the US senate election; cryptocurrencies extend the recent surge. US equities gained led by small caps, while Technology, Energy and Cyclical sectors all led gains; European & Asian equities also gained. US interest rates increased while European rates were little changed; the US Dollar fell against most currencies led by the Euro, British Pound Sterling and Swiss Franc. Oil led commodity gains while Metals were led by Platinum & Silver; Wheat, Lumber & Corn all surged in Agricultural commodities. Hedge Funds and Risk Premia indices posted gains to conclude a strong 2020 with the HFRX Global Hedge Fund Index posting a gain of +2.45% in December and +6.81% for 2020, its second best yearly return since 2009, while the HFRX Market Directional Index posted a gain of +4.29% and +8.99% for the year.
HFRX Equity Hedge Index posted a gain of +3.60% for December, +4.60% for 2020, from gains in Fundamental strategies and Market Neutral managers. The HFRX Fundamental Growth Index posted a gain of +6.79%, +3.35% YTD, from exposure to Emerging Markets and small-cap US and global equities. The HFRX Fundamental Value Index posted a gain of +2.12%, +4.60% YTD, from gains in exposure to large-cap US & European equities. The HFRX Market Neutral Index gained +0.28% for the month, -3.92% YTD, from gains in mean reverting, factor-based strategies and fundamental managers.
HFRX Macro/CTA Index posted a gain of +2.97% for December, +4.29% for the year, from gains in Global Discretionary and Systematic strategies. Macro Discretionary managers posted gains from exposure to opportunistic Fixed-Income, multi-asset and Emerging Markets strategies. The HFRX Macro Systematic/CTA Index posted a gain of +3.95%, +1.84% YTD, as the US Dollar continued its weakness against other currencies while most commodities posted gains.
HFRX Event Driven Index posted a gain of +2.18% for December, +8.89% for 2020, from gains in Merger Arbitrage managers and Special Situations equity strategies. The HFRX Merger Arbitrage Index gained +1.78%, +4.44% YTD, its best yearly return in 5 years, as M&A global activity continued at an increased pace. The HFRX Special Situations Index posted a gain of +2.20% and +9.22% YTD, its best yearly performance since 2013, from gains in exposure to Asian and Global catalyst-driven, fundamental value equities.
HFRX Relative Value Arbitrage Index posted a gain of +1.13% for December, +8.14% for the year, its best yearly performance since 2009, from gains in Convertible Arbitrage and Multi-Strategy managers. The HFRX Convertible Arbitrage Index posted a gain of +2.19%, +15.72% YTD, also its best yearly performance since 2009 and the second best since inception of the index, as US interest rates climbed and volatility increased during the month. The HFRX RV: Multi-Strategy Index posted a gain of +1.04% for the month and +7.48% YTD, its best yearly performance since 2010, as the yield curve steepened during the month.
Comments reference performance figures for December 31, 2020