While many funds did record a loss for the month, there were some signs towards the end of the month that managers were making money again, pointing to the possibility of a more profitable April for some. Still, there is plenty of ground to be made up before indices reach the heady heights of the New Year holiday.
The uptick in Event Driven is also significant, as it had been proving decidedly lacklustre over the winter months, with little really to shout about since October. Many investors are saying that, with the prospects of a gradual recovery in developed economies, more opportunities will emerge for event-driven hedge funds. Allocations to event driven in the fourth quarter of last year were substantial, according to a report from consultant Brighton House. PricewaterhouseCoopers, in a report in March, indicated an increase in M&A activity in the mining sector, with $113 billion in deals completed in 2010 alone, with deal volume up 28% from 2009.
The earthquake and tsunami in Japan, along with the emerging crisis in Libya – the first major oil producer to be clobbered by the ‘Arab Spring’ – led to highly volatile markets over the month of March. Inflation fears continued to dog Asian investors, and funds with exposure to China. Some investors were seen to be re-trenching, selling out of emerging markets funds. In Europe, to which a large slice of the funds reporting to our database have exposure, concerns continued to swirl over Portugal’s financial health and the future of the euro.
Consequently, while some solid trends did emerge in the second half of March, and we expect them to have continued to help funds to profit in April, global events and crises made it difficult for portfolio managers to make money outside the event driven space. The four strategy indices reported here represent the bulk of the total universe of funds in the database, while the master index tracks all those funds with hedge fund characteristics as defined by our methodology. In addition, we are also tracking a growing number of absolute return UCITS funds (i.e. with no benchmark index but also no active management of the short book) as part of our data gathering activities, although we will not be publishing an index using this data until the universe becomes more comprehensive.
All our indices are comprised of UCITS III-compliant hedge funds that are currently reporting to our database. The dominant strategies in the universe are long/short equity, event driven and macro, although we are also now publishing a master index that incorporates the performance of all the funds in the database, apart from absolute return funds and funds of funds. We publish both equal and asset weighted versions of each strategy index electronically for our database subscribers. In the hard copy editions of The Hedge Fund Journal we are using equal-weighted indices.
The indices have a ‘live’ date of 1st January 2010, although performance as published here is to the end of January 2011. Subscribers to our database will receive index performance data as part of their subscription package, and they are also available via our demo account facility.
To register your fund in the UCITS Hedge database, or to arrange a demo account if you are interested in subscribing, please email Renaud Cohard at renaud.cohard@thehedgefundjournal.com
