The continued decline reflected further fears about slowing world economic growth and the growing odds of a ‘double dip’ recession in Europe. This saw energy and other commodity prices decline, a factor that fed into falls in oil and mining company equities. Across the broad hedge fund universe the scale of the September decline was reflected in a drawdown of -2.99% for The HFRX Global Hedge Fund Index.
Once again the UCITS Hedge Equity Long/Short Index suffered the biggest decline of our four sub-indexes, losing -1.85%. Although an improvement on September it is still the second biggest loss since inception for the index, which at the end of the third quarter had recorded a drawdown of -7.04%. Emerging market, energy and value stocks/funds saw the biggest declines. Smaller losses were recorded specialist technology/healthcare funds and managers pursuing market neutral strategies.
The macro backdrop to September featured leaks and counter leaks on the euro as political leaders in Germany and France sought to leverage their positions by speaking to the media. The uncertainty engendered by the euro’s prospects kept volumes very thin. Chinese stocks remained flat, which impacted commodities where prices trended softer. A counter force of sorts via further quantitative easing from the US Federal Reserve provided some support for equity and commodities prices. One veteran London hedge fund manger remarked that the thin volume and predominance of political factors had led many long-only institutional investors to withdraw from the market.
Once again, the Macro Systematic Index put in a resilient performance, easing just -0.32% in September. It remains the second strongest performer over 2011 to end-September with a decline of -1.73%. The sector that had the second lowest losses during September was the Relative Value Index, which showed a fall of -0.49%. It is the best performer to end-September with a decline of -1.56% and remains in positive territory for the 21 months since the UCITS Hedge Index opened on 1st January 2010.
Meanwhile, after a fall of over 1% in August, the Macro Discretionary Index reduced its performance drawdown to 0.54%. It thus remains the second biggest decliner for 2011, down -5.27% at the end of the third quarter. However, the relative strength of the Macro Discretionary Index means its drawdown has been surpassed by the Equity Long/Short Index, which over the 21-month life of the UCITS Hedge Index is down over 4%.
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. In all, the database is now tracking over 400 funds.
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 September 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
