Followers of UCITS Hedge will note that two new sub-indexes appear for the first time: Event Driven and Fund of Funds. As a sufficient number of funds offer a strategy, UCITS Hedge will add additional sub-indexes.
The renewed decline of a majority of funds in November means that over 70% of UCITS hedge funds are in drawdown for 2011. The biggest loser by strategy was emerging markets with Asia-ex Japan the biggest decliner as risk-off returned. This puzzled some traders who believe that China is successfully engineering a soft landing that will be supportive of strong GDP growth of around 8%. Nonetheless, energy and other commodity focused equity funds lost ground even though the price of WTI crude rose 8% during November. Across the broad hedge fund universe the scale of the November decline was reflected in a fall of -0.92% for The HFRX Global Hedge Fund Index.
The UCITS Hedge Equity Long/Short Index suffered the biggest decline of our six sub-indexes, falling -2.03% and nearly erasing all of October’s +2.08% rebound. That is the second biggest drawdown in the sub-index during the 23 months of data collection. The fall raises the year-to-date drawdown to -7.04%. Unsurprisingly, market neutral strategies and short sellers were the most resilient performers, with the former dipping slightly and the latter making returns.
The macro backdrop to October featured Euro zone policy confusion amid the EU’s glaring institutional political weakness. Early in November Italy’s Berlusconi regime resigned. Then sovereign debt markets in Europe effectively closed as buyers evaporated even for German government debt. The likelihood of a double dip recession in the UK and Europe moved closer to being odds on.
Amid the gloom the Relative Value Index put in the second strongest performance, rising 0.03% in November. This helped to ease the 11 month drawdown to -0.87%, making it the best performing sub-index for both the year and since the inception of the database. Indeed, the sub-index is the only strategy where a majority of managers have posted positive performance in 2011. The Macro Discretionary Index eked out a 0.37% gain, which was enough to move it out of the strategy performance basement though it is stilling nursing a year to November drawdown of -4.77%.
Meanwhile, the Macro Systematic Index lost -0.38%, taking its year-to-date drawdown to -2.47%. The new Fund of Funds Index fell -0.47% for a -3.14% drawdown to November with the Event Driven Index down -0.99% for a YTD loss of -4.18%.
The six 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 what we term Single Alpha 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 480 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, relative value 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, while performance as published here is to the end of November 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. THFJ
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
