UCITS HFRU Indices: Mid-January Performance Update

Global financial markets posted mixed performance to begin 2014, as the expectations for continued US economic improvement remained robust, with both Gold and the US Dollar gaining to begin the year, despite the weak employment report. Global equity markets were also mixed, with European gains offsetting Asian and Emerging Market declines while US equities differed across sectors and market caps. European gains were led by strong gains in Italy and Spain, while Switzerland, Germany and the UK also posted gains; China led declines across Asia, with additional declines across Korea, Japan & Australia. US equities were led by Biotechnology, REITs, Healthcare and Commodity sensitive, which were partially offset by declines in Energy and Retail. The US Dollar gained against the British Pound Sterling and Euro to start the year, despite declining against the Japanese Yen. Yields declined across developed markets including the US, Canada, UK, Germany and Japan, with the US curve flattening on gains in long dated maturities, while high yield and investment grade credit tightened. Metals gained led by Gold, Platinum and Silver, while Oil and Energy Commodities declined. Sugar and Wheat led agricultural commodity declines, only partially offset by Cattle and Cocoa. UCITS compliant Hedge funds posted gains, with the HFRU Hedge Fund Composite Index gaining +0.82% through mid-January.

HFRU Equity Hedge Index posted a gain of +1.39% through mid-January, with positive contributions from Global Healthcare, European and MENA equities offset by declines in exposures to Brazil and China.

HFRU Event Driven Index posted a gain of +0.73% through mid-January, with contributions from European Equity Special Situations and Emerging Markets Fixed Income strategies, while Merger Arbitrage managers had mixed performance and Asian exposure experienced declines.

HFRU Macro Index posted a gain of +0.18% through mid-January, with performance from Commodity – Precious Metals and Systematic Fixed Income strategies, partially offset by declines in discretionary macro managers.

HFRU Relative Value Arbitrage Index posted a gain of +0.66% through mid-January, with gains in Global Convertible, Fixed Income and Real Estate strategies, offset by declines in Volatility managers.

Comments reflect performance figures as of January 15, 2014.

 

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HFRX Daily Indices Mid-January 2014 Performance Update

Global financial markets posted mixed performance to begin 2014, as the expectations for continued US economic improvement remained robust, with both Gold and the US Dollar gaining to begin the year, despite the weak employment report. Global equity markets were also mixed, with European gains offsetting Asian and Emerging Market declines while US equities differed across sectors and market caps. European gains were led by strong gains in Italy and Spain, while Switzerland, Germany and the UK also posted gains; China led declines across Asia, with additional declines across Korea, Japan & Australia. US equities were led by Biotechnology, REITs, Healthcare and Commodity sensitive, which were partially offset by declines in Energy and Retail. The US Dollar gained against the British Pound Sterling and Euro to start the year, despite declining against the Japanese Yen. Yields declined across developed markets including the US, Canada, UK, Germany and Japan, with the US curve flattening on gains in long dated maturities, while high yield and investment grade credit tightened. Metals gained led by Gold, Platinum and Silver, while Oil and Energy Commodities declined. Sugar and Wheat led agricultural commodity declines, only partially offset by Cattle and Cocoa. Hedge funds posted gains with the HFRX Global Hedge Fund Index posting a gain of +0.45% through mid-month, while the HFRX Market Directional Index gained +0.73%.

HFRX Equity Hedge Index posted a gain of +0.73% through mid-January, with gains in Market Neutral and Fundamental managers. The HFRX Fundamental Growth Index rose +2.28% from gains concentrated in Global Healthcare and International mid- and small-cap equity. The HFRX Fundamental Value Index gained +0.14% with performance in European exposure partially offset by Consumer large-cap equity. The HFRX Market Neutral Index gained +0.40%, with gains across mean reverting and fundamental, factor-based models.

HFRX Event Driven Index posted a gain of +0.75% through mid-January, with contributions from Distressed/Restructuring and Equity Special Situations strategies. HFRX Special Situations Index gained +0.73% through mid-month from exposure to Financials, Cyclicals and Communications, with core positioning in Cole REIT, McKesson, Penn West, Tribune Co., Hertz, Ferro, North American Energy, American Realty, Time Warner and Life Technologies. The HFRX Distressed Index posted a gain of +0.94% for the period from performance in various restructurings across Consumer, Communications, Industrial and Basic Materials sectors. HFRX Merger Arbitrage Index posted a decline of -0.23%, with contributions from transactions in CapitalSource/PacWest Bancorp, Kroger/Harris Teeter, FNB/BCSB Bancorp, Koch/Molex and Thermo Fisher/Life Technologies.

HFRX Relative Value Arbitrage Index posted a gain of +0.30% through mid-January with gains across Convertible Arbitrage and Multi-Strategy managers as credit spreads tightened while falling yields were led by gains in longer dated maturities. HFRX Fixed Income Credit Index and the HFRX Convertible Arbitrage Index gained +0.83% and +0.29%, respectively, as credit & yield gains offset volatility declines.

HFRX Macro Index posted a decline of -0.13% through mid-January, with weakness in trend-following CTA and Currency strategies, partially offset by gains in Emerging Markets and Fixed Income exposure. The HFRX Macro: Systematic Diversified Index declined -0.63% with weakness across equity and fixed income exposures, while the HFRX Emerging Markets Index posted a gain of +0.27% with contributions from Emerging Europe, as well as opportunistic Latin America and Currency exposure.


Comments reference performance as published for January 15, 2014.

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EQUITY, EVENT DRIVEN HEDGE FUNDS LEAD INDUSTRY TO BEST GAIN SINCE 2010

Technology/Healthcare, Yield Alternatives and Distressed Strategies lead 2013 performance as HFRI posts 16th advance in 19 months;

Macro, CTA strategies post narrow decline for 2013 despite ending year with 3rd consecutive monthly gain

CHICAGO, (January 8, 2014) - Hedge funds posted a fourth consecutive month of gains in December led by Equity Hedge and Event Driven strategies, as broad-based performance gains across all strategies contributed to the strongest annual performance since 2010. The HFRI Fund Weighted Composite Index gained +1.2 percent in December, bringing full year 2013 performance to +9.3 percent , as reported today by HFR, the established global leader in the indexation, analysis and research of the global hedge fund industry. The HFRI Fund of Hedge Funds Index advanced +1.2 percent for December and +8.7 percent for 2013, the best annual performance since 2009.

Performance gains for December and for 2013 were led by resurgent Equity Hedge strategies, with the HFRI Equity Hedge Index gaining +1.6 percent for the month and +14.6 percent for the year, also the best annual performance since 2009. Mirroring trends in the broader equity market and benefitting from the strong IPO environment, the strongest area of EH sub-strategy performance was from funds focused on Technology and Healthcare, with the HFRI EH: Technology/Healthcare Index gaining +2.6 percent in December and +22.3 percent for 2013, completing a 5th consecutive year of gains and nearly topping the +25.8 percent gain for 2009. Energy/Basic Materials funds also posted strong gains for December, up +2.1 percent, while Fundamental Value strategies climbed +1.9 percent for December and +20.1 percent for 2013.

Event Driven funds also posted gains in December, as strategic M&A and shareholder activism continued to drive performance. The HFRI Event Driven Index was up +1.2 percent for December and +12.5 percent for 2013, also the best annual performance since 2009. ED funds specializing in Activist and Special Situations strategies led ED returns in both December and for 2013, with these climbing +2.0 and +1.6 percent for the month, respectively, and +16.6 and +15.1 percent for the full year. The HFRI Distressed Index gained +13.6 percent in 2013, completing the fourth double-digit gain for Distressed funds in the last five years.

Fixed Income-based Relative Value Arbitrage posted a fifth consecutive year of gains in 2013, advancing +0.9 percent in December and +7.2 percent for 2013; RVA has led all hedge fund strategies with an annualized gain of +10.7 percent since 2009. RVA was led by Yield Alternatives and Asset Backed strategies for the month, with the HFRI Yield Alternative Index gaining +0.6 percent for December and +16.7 percent for 2013, while the HFRI FI: Asset Backed Index gained +1.6 for December and +10.7 percent for the full year.

Macro strategies ended 2013 with a third consecutive month of gains, as performance improved across Systematic CTA, Discretionary Commodity, Energy, Currency and Thematic Multi-strategies into year end, but this was not sufficient to overcome early 2013 losses. The HFRI Macro Index gained +0.5 percent for December, but posted a narrow drop of -0.3 percent for 2013, the third consecutive year of declines. The HFRI Systematic Diversified CTA Index also gained +0.6 percent for December but declined -0.75 percent for 2013, also capping a third consecutive year of declines. Active Trading and Multi-Strategy funds +0.8 and +0.6 percent, respectively, for December and +5.8 and +3.8 percent for 2013. In a volatile month for Emerging Markets punctuated by equity declines in China and Brazil, the HFRI Emerging Markets Index gained +0.14 percent, ending 2013 with a gain of +5.2 percent.

"Hedge funds posted the strongest year since 2010 with gains concentrated in both Equity Hedge and Event Driven strategies, as long-biased beta equity exposure, high yield credit tightening and the dynamic environment for shareholder activism and corporate transactions offset the negative impact of short equity portfolio hedges, rising yields and macro complexity associated with stimulus measures by the US Federal Reserve," stated Kenneth J. Heinz, President of HFR. "While both equity and credit-oriented strategies had the best performance since 2009, the reduction of quantitative easing into the end of 2013 constitutes a crucial inflection point for hedge fund strategy performance, allowing for a beginning of the normalization of market interest rates integral to the performance of Fundamental Macro and Equity hedge fund strategies. As this process evolves, the attribution of hedge fund performance between long and short portfolios is likely to shift to a more balanced distribution, enabling profitable mean reversion across equity and fixed income positions and contributing to a more tractable environment for Macro strategies, extending industry wide performance gains into 2014."

Comments reference Flash Update performance figures as posted on January 8, 2014.

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HFRX Indices December & Year End 2013 performance notes

Global financial markets posted mixed gains in December, recovering intra-month, mid-December declines to conclude strong performance for both 4Q and FY 2013 as the US Federal Reserve began the process to reducing quantitative easing measures. Global equity markets were mixed, with US & European gains partially offset by mixed performance in Asia and Emerging Markets. Equity gains were led by the US as the outlook for the US economic recovery continued to improve with large cap Industrials leading December performance; Semiconductors, Telecommunications and Energy sectors led performance in December. European equities also posted gains, led by Germany, Russia, the U.K., Sweden and the Netherlands, while Asian equities were mixed with gains in Japan, Taiwan and India offset by declines in China, Hong Kong and the Philippines. Despite the broad based gains, certain developed and emerging markets posted declines for the month, led by Turkey, Argentina, Italy & Brazil. Fixed income yields rose as the US Federal Reserve reduced monthly fixed income purchases, with the U.S. 10 Year bond yield closing the year above 3%, while the US curve flattened as yields rose more sharply in shorter dated issues. European yields also generally rose led by increases in UK Gilts, German Bunds, France, Russia and the Netherlands, while high yield credit tightened into year end. The US dollar posted mixed performance, with gains against the Japanese Yen, Argentine Peso and Indonesian rupiah offset by declines against the British Pound, Euro and Swedish Krona. Energy commodities posted gains led by Crude Oil & Natural Gas, while Metals were mixed as Gold & Silver declined; agricultural commodities declines were led by Wheat & Sugar, while Cotton gained. Hedge funds gained in 2013 with equity-related strategies posting their best annual performance in four years, with the HFRX Global Hedge Fund Index gaining +0.56% for December and +6.72% for 2013, the best annual performance since 2009. HFRX Market Directional Index gained +0.89% for December and +9.50% for 2013, also the best Index annual performance since 2009.

HFRX Equity Hedge Index posted a gain of +1.25% for December, ending 2013 with a gain of +11.14%, the best Index performance in four years. HFRX Fundamental Value Index gained +1.39% for the month, gaining +16.1% for the year, the best annual performance since 2005. HFRX Fundamental Growth Index gained +1.21% for the month, with contributions from Emerging Asia and Global Healthcare, while HFRX Market Neutral Index gained +0.17% for the month, ending the year with a 3rd consecutive monthly gain.

HFRX Event Driven Index posted a gain of +0.28% for December, ending 2013 with a gain of +13.9%, the best performing strategy in 2013 and the best annual performance for ED since 2009. HFRX Special Situation Index gained +0.38% for December, contributing to a gain of +18.2% for 2013, also the best annual gain since 2009. December performance was driven by exposure to Cyclicals, Industrial and Communications sectors, with core positioning in Cole REIT, Hertz, American Realty, Briggs & Stratton, Penn West, Time Warner and GM. HFRX Merger Arbitrage Index posted a gain of +0.45% for the month, with contributions from transactions in Kroger/Harris Teeter, NYSE/Intercontinental Exchange, CapitalSource/PacWest, Salix/Santarus, FNB/BCSB Bancorp, Koch/Molex and Thermo Fisher/Life Technologies. HFRX Distressed Index posted a modest decline of -0.02% for the month, with mixed contributions from various restructurings across Consumer, Technology, Non-Cyclical and Basic Materials sectors.

HFRX Macro Index posted a modest decline of -0.05% for December, with gains in trend-following CTA strategies offset by declines in Currency and Fixed Income strategies. HFRX Macro: Systematic Diversified Index gained +0.55% for the month, ending the year with a 3rd consecutive monthly gain, while the HFRX Emerging Markets Index gained +0.10% for the month.

HFRX Relative Value Arbitrage Index posted a gain of +0.60% for December, with gains in Convertible Arbitrage and Multi-Strategy managers as effective rate hedging and credit tightening offset the impact of rising yields. The HFRX Convertible Arbitrage Index gained +1.11% for the month and +10.42% for the year, the best annual performance since 2009. HFRX RV: Multi-Strategy Index rose +0.25% while HFRX Fixed Income Credit Index posted a gain of +0.45% , with both Indices ending the year with a 4th consecutive month of gains.

Comments reference performance figures as posted for December 31, 2013

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HFRU Indices - December 2013 performance notes

Global financial markets posted mixed gains in December, recovering intra-month, mid-December declines to conclude strong performance for both 4Q and FY 2013 as the US Federal Reserve began the process to reducing quantitative easing measures. Global equity markets were mixed, with US & European gains partially offset by mixed performance in Asia and Emerging Markets. European equities also posted gains, led by Germany, Russia, the U.K., Sweden and the Netherlands, while Asian equities were mixed with gains in Japan, Taiwan and India offset by declines in China, Hong Kong and the Philippines. Equity gains were led by the US as the outlook for the US economic recovery continued to improve with large cap Industrials leading December performance; Semiconductors, Telecommunications and Energy sectors led performance in December. Despite the broad based gains, certain developed and emerging markets posted declines for the month, led by Turkey, Argentina, Italy & Brazil. Fixed income yields rose as the US Federal Reserve reduced monthly fixed income purchases, with the U.S. 10 Year bond yield closing the year above 3%, while the US curve flattened as yields rose more sharply in shorter dated issues. European yields also generally rose led by increases in UK Gilts, German Bunds, France, Russia and the Netherlands, while high yield credit tightened into year end. The US dollar posted mixed performance, with gains against the Japanese Yen, Argentine Peso and Indonesian rupiah offset by declines against the British Pound, Euro and Swedish Krona. Energy commodities posted gains led by Crude Oil & Natural Gas, while Metals were mixed as Gold & Silver declined; agricultural commodities declines were led by Wheat & Sugar, while Cotton gained. UCITS compliant Hedge funds posted gains, with the HFRU Hedge Fund Composite Index gaining +0.22% for December.

HFRU Equity Hedge Index posted a gain of +0.43% for December, with positive contributions from Global Technology, Financials, European and Diversified Emerging Markets equities, which were partially offset by exposure to Turkey, Brazil and China.

HFRU Event Driven Index posted a gain of +0.80% for December, with contributions from European Equity Special Situations, Capital Structure Arbitrage and Merger Arbitrage managers, which were only partially offset by Emerging Markets exposure.

HFRU Macro Index posted a gain of +0.11% for December, with contributions from Systematic CTA, Discretionary Commodity and Trading Oriented strategies, which were only partially offset by declines in Commodity Metals and discretionary Currency exposure.

HFRU Relative Value Arbitrage Index posted a decline of -0.13% for December, with gains in Fixed Income, Asset-Backed and Convertible strategies offset by declines in Volatility and Emerging Markets exposure.

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Comments reference performance as posted on January 6, 2013

The HFRU Indices are published on a daily basis and comprise the most comprehensive benchmarks of UCITS hedge fund performance available. HFRU Indices are representative of the complete universe of hedge funds compliant with UCITS guidelines, and include four strategy indices (Equity Hedge, Event Driven, Macro and Relative Value Arbitrage) and an aggregate HFRU Hedge Fund Composite Index.

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