Hedge Funds Fail To Escape Grip Of Gloomy January

Tom Burroughes

9 February 2016

Hedge funds as a group reported negative performance in January as global markets for equities and crude oil dropped, although some strategies exploiting heightened volatility and market declines made ground, latest figures show.

said its HFRI Fund Weighted Composite Index reported a decline of -1.7 per cent for January, bringing the index value to 12073.48, while the HFRI Asset Weighted Composite Index fell -1.2 per cent. Total hedge fund capital was $2.90 trillion to start 2016, narrowly below the mid-2015 record level of $2.93 trillion.

Macro hedge funds led gains for the month, with contributions from trend-following short exposure to equity and commodity markets. The HFRI Macro Index posted a gain of 1.5 per cent in January, while the HFRI Macro: Systematic Diversified/CTA Index was up 2.6 per cent, both representing the strongest respective gains since January 2015. Also for the month, the HFRI Macro: Currency Index added 0.9 per cent, while the HFRI Macro: Active Trading Index advanced 2.6 per cent. Partially offsetting these, the HFRI Macro: Discretionary Thematic Index declined by -1.1 per cent, while the HFRI Macro: Commodity Index fell -0.7 per cent.

Directional equity and credit strategies declined in January, with the HFRI Equity Hedge Index falling -3.7 per cent, the worst monthly performance since May 2012.

Equity hedge losses were led by the volatile technology and healthcare space, with the HFRI EH: Technology/Healthcare Index falling -8.1 per cent, the worst monthly decline since February 2001.

The HFRI EH: Fundamental Value and Fundamental Growth indices fell -4.1 and -4.5 per cent, respectively.

Emerging markets hedge funds also posted steep losses, as the HFRI Emerging Markets Index declined -4.6 per cent, led by emerging Asia and Middle East exposures, with these HFRI indices falling -7.3 and -6.8 per cent, respectively. Partially offsetting these losses, the HFRI EH: Short Bias Index advanced 2.9 per cent for the month, while the HFRI EH: Equity Market Neutral Index gained 0.8 per cent.

Event driven and fixed income-based relative value arbitrage strategies also posted declines for the month, as the HFRI Event Driven Index fell -2.3 per cent, while the HFRI Relative Value Arbitrage Index declined by -1.7 per cent. Event driven losses were led by the HFRI ED: Activist and HFRI ED: Special Situations indices, which fell -6.1 and -2.9 per cent, respectively.