EQIRA: Empirical and Quantitative Investment Research and Analysis

Hedge Funds Weekly: July 4, 2016

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.

Highlights

  • Our factor-based estimates project that hedge funds added 0.97% last week as rising equities fueled performance
  • Hedge funds are now up 0.19% for the month and 0.55% for the year
  • All but two of the 30 hedge fund strategies we track earned positive returns
  • We currently estimate that hedge funds returned 0.07% in June, 0.06% more than our initial projection of 0.01%
  • Almost all of our global benchmarks gained as markets rebounded from last week’s Brexit-related losses
  • Equity indexes of every major region, sector and style rose
  • All of our major bond indexes increased
  • Commodity beta, term structure, momentum and trend following factors all gained
  • Emerging currencies joined carry and momentum strategies in earning strong risk-adjusted returns
  • All of our U.S. short volatility and variance strategies rose
  • Trend following strategies gained in most asset classes, but momentum strategies were inconsistent

Global Hedge Fund Performance

  • Our factor-based estimates project that hedge funds added 0.97% last week as rising equities fueled performance
  • Hedge funds are now up 0.19% for the month and 0.55% for the year
  • Our factor attribution analysis suggests positive weekly contributions from equity beta (0.66%), short volatility (0.14%) and currency momentum (0.06%)
  • It indicates negative weekly contributions from equity sector beta (-0.08%), the spread between MLPs and REITs (-0.06%) and equity region beta (-0.05%)
  • It estimates weekly, month-to-date and year-to-date alphas of 0.03%, 0.00% and 0.35%, respectively

eqira_hf_retatt_1w_20160704

eqira_hf_retatt_mtd_20160704

Strategy Performance

  • All but two of the 30 hedge fund strategies we track earned positive returns
  • Leaders: Latin America (2.60%), Emerging Asia (2.34%) and Managed Futures (2.19%)
  • Laggards: Equity Short-Bias (-1.36%), Convertible Arbitrage (-0.09%) and Fixed Income Arbitrage (0.14%)
  • North American funds trailed both Asian and European funds
  • Equity beta was the most significant factor driving strategy returns
  • Alpha leaders: Managed Futures (1.07%), Equity Short-Bias (0.47%) and Emerging Asia (0.40%)
  • Alpha laggards: Energy (-0.23%), Convertible Arbitrage (-0.18%) and Technology (-0.15%)

eqira_hf_ests_20160704

Global Benchmarks

  • Almost all of our global benchmarks gained as markets rebounded from last week’s Brexit-related losses
  • Leaders: Latin America equity (6.75%), base metals (5.03%) and U.S. REITs (4.71%)
  • Laggards: developed ex-U.S. currencies (0.00%), cash (0.00%) and U.S. 1-3-year Treasuries (0.10%)
  • Equities: indexes of every major region, sector and style rose
  • Bonds: all of our major bond indexes increased, with emerging, inflation-linked and investment grade bonds leading the way
  • Real Estate: real estate securities joined in equity gains both domestically and abroad
  • Commodities: all major commodity sectors rose, led by base metals
  • Currencies: developed market currencies were flat against the dollar, but emerging currencies appreciated
  • Multi-Asset: risk parity outperformed 60/40, but all of our balanced indexes notched healthy gains

eqira_gb_20160704

eqira_gb_top_movers_20160704

Market Factors

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

  • Leaders: the spread between 10-year and 1-year European government bonds (3.92%), short short-dated VIX futures (3.50%) and VIX futures term structure (3.46%)
  • Laggards: the spread between U.S. mortgage-backed securities and U.S. Treasuries (-2.63%), developed market equity value (-2.41%) and U.S. equity value (-2.05%)
  • Commodity: beta, term structure, momentum and trend following factors all rose
  • Credit: investment grade bonds outperformed Treasuries on an absolute basis, but underperformed on a duration-adjusted basis
  • Equity: size and value factors struggled worldwide, while momentum factors posted mixed results
  • Fixed Income: term structure strategies posted outsized returns both in the U.S. and Europe
  • Foreign Exchange: emerging currencies joined carry and momentum strategies in earning strong risk-adjusted returns
  • Multi-Asset: short-term momentum and trend following strategies profited, but medium-term momentum lagged
  • Real Estate: real estate securities outperformed small cap equities both in the U.S. and abroad
  • Risk: all of our U.S. short volatility and variance strategies rose
  • Momentum: trend following strategies gained in most asset classes, but momentum strategies were inconsistent

eqira_mf_20160704

eqira_mf_top_movers_20160704

June 2016 Estimate Review

We will begin analyzing our June hedge fund index return estimates next week once more of the indexes underlying our composite indexes have reported returns.

Connect With Us

Follow us on Twitter: @eqira
And on LinkedIn: Eqira