EQIRA: Empirical and Quantitative Investment Research and Analysis

Hedge Funds Weekly: September 7, 2015

The following is an excerpt from our Hedge Funds Weekly report, which is available in the clients section. If you are not yet a client, please request access.

Hedge Fund Performance

Eqira’s factor-based estimates project that hedge funds lost 0.72% last week as equity declines globally again drove down returns. Our factor-attribution analysis indicates that despite producing 23 basis points of positive alpha, hedge funds were unable to overcome losses from equity beta (-0.82%), short volatility strategies (-0.17%), and foreign equities (-0.15%). Their collective performance currently stands as -0.58% month-to-date and +0.24% year-to-date.


Global Benchmarks

All of our equity, real estate, and currency benchmarks posted losses this week. US equities lost 3.20%, while foreign equities fared even worse. Developed Europe fell 3.65%, developed Asia tumbled 5.34%, and emerging market equities dropped 3.69%. Real estate was particularly hard hit, losing 4.31% globally. US REITs lost 4.82%. Foreign currencies extended their long slides. Both developed and emerging currencies have lost in excess of 13% relative to the US dollar in the last year.

US bonds managed to post modest gains, while rising oil prices helped push the energy commodity complex to a small gain.

All of our multi-asset class benchmarks declined. Our global 60/40 and risk parity indexes lost 2.12% and 2.25%, respectively. The US versions fared slightly better, losing only 1.81% and 1.49%.

Market Factors

Note: we report factor performance using excess returns risk-adjusted to an expected annual standard deviation of 10%.

Short volatility and variance factors were once again the week’s worst performers, as realized volatility remained high and the VIX continued to hover in the high 20s.

Commodity momentum, equity beta, emerging market currencies, and FX carry strategies all performed poorly, as did the spread between inflation-linked bonds and US Treasury bonds and the spread between US REITs and US equities.

Outside of commodities, momentum and trend following strategies worked well, with equity country, equity sector, currency, and multi-asset class strategies all gaining. FX value also notched a significant gain.

August 2015 Estimate Review

Only a handful of the indexes underlying our composite indexes having begun reporting returns. As such, it is too early to begin drawing conclusions regarding the accuracy of our August 2015 return estimates. We will do so starting next week.


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