EQIRA: Empirical and Quantitative Investment Research and Analysis

Hedge Funds Weekly: December 5, 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 projections estimate that hedge funds fell 0.14% last week as domestic equity losses stifled performance
  • Hedge funds are now down 0.10% for the month and up 3.51% for the year
  • 10 of the 30 hedge fund strategies we track earned positive returns
  • Aside from oil, which skyrocketed, most asset classes posted modest, mixed returns
  • Stocks were down worldwide, but losses were most pronounced in the US
  • Fixed income securities were mostly up, led by developed market government bonds and high yield
  • Oil soared to double digit gains, leading our broad commodity index upward
  • Both developed and emerging market currencies appreciated against the dollar
  • Most of our short volatility and variance strategies declined
  • Trend following strategies gained in most asset classes

Global Hedge Fund Performance

  • Our factor-based projections estimate that hedge funds fell 0.14% last week as domestic equity losses stifled performance
  • Hedge funds are now down 0.10% for the month and up 3.51% for the year
  • Our factor attribution analysis suggests positive weekly contributions from the spread between developed market equities and US equities (0.16%), equity region beta (0.04%) and alpha (0.03%)
  • It indicates negative weekly contributions from equity beta (-0.25%), currency momentum (-0.04%) and agricultural commodity beta (-0.04%)
  • It estimates weekly, month-to-date and year-to-date alphas of 0.03%, 0.02% and 0.71%, respectively

eqira_hf_retatt_w01_20161202

eqira_hf_retatt_mtd_20161202

Strategy Performance

  • 10 of the 30 hedge fund strategies we track earned positive returns
  • Leaders: Emerging Europe (1.31%), Energy (0.54%) and Special Situations (0.42%)
  • Laggards: Healthcare (-0.81%), Technology (-0.72%) and Latin America (-0.59%)
  • North American funds trailed both Asian and European funds
  • Equity beta was the most significant factor driving strategy returns
  • Alpha leaders: Special Situations (0.43%), Equity Value (0.40%) and Technology (0.33%)
  • Alpha laggards: Healthcare (-0.48%), Europe (-0.35%) and Managed Futures (-0.34%)

eqira_hf_proj_20161202

Global Benchmarks

  • Aside from oil, which skyrocketed, most asset classes posted modest, mixed returns
  • Leaders: oil futures (12.21%), energy commodities (11.77%) and commodities (3.51%)
  • Laggards: US information technology equity (-2.98%), agricultural commodities (-2.92%) and base metals (-2.68%)
  • Equities: stocks were down worldwide, but losses were most pronounced in the US
  • Bonds: fixed income securities were mostly up, led by developed market government bonds and high yield
  • Real Estate: real estate securities dropped slightly in the US, but rose overseas
  • Commodities: oil soared to double digit gains, leading our broad commodity index upward
  • Currencies: both developed and emerging market currencies appreciated against the dollar
  • Multi-Asset: risk parity modestly outperformed 60/40, but all of our multi-asset class benchmarks fell

eqira_gb_20161202

eqira_gb_top_movers_w01_20161202

eqira_gb_top_movers_mtd_20161202

Market Factors

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

  • Leaders: oil futures (3.72%), US equity index value (3.24%) and the spread between US energy equity and the market (3.06%)
  • Laggards: commodity term structure (-3.47%), the spread between US municipal bonds and US Treasuries (-2.98%) and 1-month commodity momentum (-2.94%)
  • Commodity: trend following strategies rose, but term structure and momentum strategies produced heavy losses
  • Credit: markets rewarded credit risk with positive returns in most regions
  • Equity: value factors rose worldwide, while size factors fell in the US and in emerging markets
  • Fixed Income: term structure strategies declined in the US but gained in Europe
  • Foreign Exchange: currency momentum stumbled while carry and value held even
  • Multi-Asset: medium-term momentum fell, but trend following and short-term momentum strategies earned profits
  • Real Estate: real estate securities outperformed small cap equities globally
  • Risk: most of our short volatility and variance strategies declined
  • Momentum: trend following strategies gained in most asset classes; momentum strategies struggled in commodities but gained in equities

eqira_mf_20161202

eqira_mf_top_movers_w01_20161202

eqira_mf_top_movers_mtd_20161202

November 2016 Projection Review

We will begin analyzing our November hedge fund index projections 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