HFR: Hedge Funds Post August Declines As Political Tensions Rise
Risks rise over Emerging Markets,
Syria, Fed stimulus extraction; Mixed performance in Event Driven, Relative
Value Arbitrage as HFRI posts 2nd decline for 2013
CHICAGO,
(September 9, 2013) – Hedge funds declined in August while US equity markets posted
the largest decline of 2013 as investors reduced risk in reaction to weakness
in Emerging Market equities and currencies, expectations for the end of
tapering by the US Federal Reserve, and uncertainty regarding US and
international involvement in Syria. The HFRI Fund Weighted Composite declined
by -0.70 percent for the month with mixed performance across various Equity
Hedge, Event Driven and Relative Value Arbitrage strategies offsetting weakness
in Macro strategies, as reported today
by HFR, the established global leader in the indexation, research and analysis
of the global hedge fund industry.
The HFRI Event-Driven (ED) Index
posted a narrow decline of -0.04 percent for the month, paring the 2013 gain
for ED to +6.9 percent, as the market for corporate transactions remained
robust despite the equity market declines. Credit Arbitrage hedge funds gained +0.8
percent and Distressed funds advanced +0.08 percent in August, while Merger
Arbitrage and Special Situations saw narrow declines of -0.11 and -0.24 percent,
respectively.
The HFRI Relative Value Arbitrage
Index fell -0.46 percent for the month, with equity and fixed income hedges
reducing volatility across RVA sub-strategies. The HFRI RV: Fixed Income –
Asset Backed and Convertible Arbitrage Indices posted gains of +0.15 and +0.22
percent, respectively, for the month, while Volatility funds fell -0.20
percent. The HFRI Equity Hedge Index
declined -0.7 percent in August, as gains across HFRI Energy/Basic Materials (+0.26
percent), Technology/Healthcare (+0.3 percent) and Short Bias (+0.6 percent) were
offset by declines in Fundamental Value and Growth, which dropped -1.3 percent
and -0.6 percent, respectively.
The HFRI Macro Index declined -1.2
percent in August, the fourth consecutive monthly decline, with weakness across
most sub-strategy and Emerging Market exposures. The HFRI Emerging Markets
(Total) Index declined -0.77 percent, with weakness across all EM regions
concentrated in Latin America, the Middle East and India. The HFRI EM: Latin
America Index declined -1.3 percent, while HFRI: Multiple Emerging Markets fell
-1.3 percent. The HFRI EM: Asia ex-Japan
Index posted a narrow gain of +0.02 percent in August, with gains in many
China-focused funds pared by mixed performance across other Emerging Asian
regions. Quantitative, trend-following CTAs also experienced losses, with the
HFRI Macro: Systematic Diversified Index declining -1.8 percent. While QE
tapering, Syria, and Emerging Market risk affected Macro performance, other
risks including fed leadership transition and US debt ceiling debate also
impacted Macro performance.
“Volatility and uncertainty
increased in August across both economic and political forums, contributing to mixed
sub-strategy performance, wide dispersion and Macro-centric weakness across
hedge fund strategy performance,” stated Kenneth J. Heinz, President of HFR. “While
the geopolitical environment has remained fluid and unpredictable through month
end, many funds entered August with conservative positioning in regard to
expectations for US Federal Reserve stimulus extraction, reducing exposure to
rising bond yields through effective portfolio hedging, composition and
duration management. Recent Emerging Markets weakness has created opportunities
in EM equity and currency markets for hedge funds to provide liquidity and
position for growth across various EM regions.
Both of these trends are likely to contribute to strong performance in
coming months as the joint economic and political uncertainties continue to
evolve,” Heinz added.
Comments reference Flash Update performance figures as posted on September 9, 2013.
View HFRI Index performance at www.hedgefundresearch.com
Comments reference Flash Update performance figures as posted on September 9, 2013.
View HFRI Index performance at www.hedgefundresearch.com
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