Overall, the UCITS Hedge master index still fell, down 0.48%, over the two months with a 0.28% gain in April being swallowed up by a 0.76% fall in May. This added to consecutive monthly losses throughout the first quarter of 2011, leaving the UCITS Hedge Index down 0.79% for 2011 to end-May. In April, most strategies recorded gains with the exception being relative value funds, which declined 0.84%. In May, the reverse proved to be the case with most funds declining, with the exception again being relative value funds which ended the month flat.
Among the different strategies 2011 has failed to build on the positive gains recorded over much of 2010. This leaves many funds loosing yet more ground to high water marks recorded last year. Relative Value is the best performing strategy index with negative performance of 0.31% year-to-date. Macro Discretionary is the worst performing strategy index in 2011 with a decline of 1.94%.
On a global level, markets are struggling to overcome the bearish sentiment swirling around financials. Banks in the US, Europe and Japan are all trading lower. In the case of Japan, bank stocks are at levels last visited in the early 1970s.
In the UK, the travails of Lloyds have hurt long/short equity returns and resulted in a rare losing run for Lansdowne Partners, which is the biggest private shareholder in the bank. Observers note that until balance sheets are rebuilt, it will be difficult to argue that bank stock prices are cheap.
Few solid trends have emerged in the second half of May to tempt investors. Trading funds may offer the flexibility to eek out returns but volatility is a dual edged sword that cuts both ways. The price of gold and Treasuries underline massive investor caution and risk aversion is again on the upswing. Low beta stocks have outperformed and high beta ones have under-performed as investors seek to insulate themselves from volatility.
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 1 January 2010, although performance as published here is to the end of May 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
