Hedge funds gain for second consecutive month in 2015

Hedge funds were up 1.59 percent in February, the second consecutive month of gains this year, according to data provider Eurekahedge.

The average performance of hedge funds in the Eurekahedge Hedge Fund Index trailed the MSCI World Index, which rose 5.47 percent.

Hedge funds as a whole attracted more money from investors during the month with inflows of US$6.8 billion.

Managers focused on developed markets posted the strongest returns but all regional and strategic investment mandates saw positive gains.

Regional mandates

- Advertisement -

The monetary policy of central banks around the world of maintaining continuously low interest rates in the U.S. and quantitative easing with a monthly 60 billion euro asset purchase program in Europe, supported the equity and bond markets in February.

Even hedge funds investing predominantly in Eastern Europe and Russia posted their first gains in eight months. The Eurekahedge Eastern Europe & Russia Hedge Fund Index rose 12.49 percent, but still trailed the Russian RTS stock index, which jumped 21.60 percent. The heavily oil-dependent Russian equity index benefited from both a bottoming out of oil prices and the appreciation of the ruble, which stopped its free fall in February as the geopolitical crisis in the Ukraine saw first signs of subsiding, Eurekahedge said.

Managers investing in Europe were the second strongest performers in February, with gains of 2.39 percent. Gains by European investment mandates of 3.56 percent for the year to date already exceeded total returns for the year 2014. In comparison, the MSCI Europe Index gained 6.09 percent in February.

Emerging market and Latin American managers were also up 1.98 percent and 1.59 percent, respectively, benefitting from the strong gains in commodities and risk assets as a whole. Meanwhile, the MSCI Latin America Index increased 7.10 percent.

Similarly, managers investing with a Japan mandate realized gains of 1.27 percent in February, underperforming the benchmark Nikkei 225, which rose 6.38 percent on further yen weakness and news that a big Japanese pension fund manager would increase its domestic equity allocation, Eurekahedge noted.

India-focused managers were down 0.51 percent in February and saw their first negative returns after 12 consecutive months of gains.

Investment strategies

Distressed debt and event-driven fund managers reversed their performance after being at the bottom of the table in January. They posted the largest returns out of all strategic mandates at 3.03 percent and 2.73 percent, respectively, mainly as a result of long positions in the high-yield bond sector. The BofA Merrill Lynch High Yield Index gained 2.33 percent in February. Managers saw particular opportunities in picking up the debt of distressed oil and gas producers, whose outlook has improved amid recovering oil prices.

The positive performance of stock markets around the world, buoyed by the quantitative easing of central banks, helped long/short equity funds to gain 2.47 percent.

CTA/managed futures strategies, in contrast, rose only 0.29 percent following high returns in January. However, for the year to date, CTA/managed futures strategies have posted gains of 3.98 percent and recorded net inflows of US$4 billion. In 2014, investors redeemed $16 billion from funds with this particular investment mandate.

- Advertisement -

Support local journalism. Subscribe to the all-access pass for the Cayman Compass.

Subscribe now