HEDGE FUND DATA 20/07/2021

Monthly hedge fund performance review – June 2021

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Inflation continued to be the defining theme for markets, despite continued commitment to current interest rate environments from the central banks of major economies. Most hedge fund master strategies generated positive returns, but with some notable exceptions.

HEDGE FUNDS
Hedge fund compositeMost, but not all, strategies monitored by Aurum’s Hedge Fund Data Engine generated positive returns in June. The average hedge fund return in June across all strategies was 0.46%, bringing year-to-date performance to 5.72%. Performance dispersion was similar to that observed in May.
Long biasedLong Biased funds monitored by Aurum’s Hedge Fund Data Engine generated positive returns in June of 0.74%. All sub-strategies, except for Long Biased Commodities, generated positive performance. The strongest performing sub-strategy was Long Biased Fixed Income amidst broadly positive credit performance in June.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine generated -0.17% in June, ending the brief period of positive performance for the strategy. CTAs and Quantitative Equity Market Neutral were the sub-strategies with negative returns returning -0.57% and -1.74%; the other strategies generated positive returns.
Equity long/shortEquity Long/Short funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 1.35% in June, the strongest performing master strategy. Most sub-strategies generated positive performance; Sector focused funds were the strongest, returning 2.88%.
MacroMacro was the weakest performing master strategy monitored by Aurum’s Hedge Fund Data Engine; the average return in June was -0.94%. Most sub-strategies had a negative or flat average return, with the exception of Macro Commodities, which returned 2.98%, another strong month for the sub-strategy.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.23% in June. All sizes of funds delivered positive returns, with the strongest performance seen in small ($0.5-1bn) multi strategy funds.
MARKETS
Major eventsThe Taliban started to take over parts of Northern Afghanistan as the US withdrawal date of 11th September approaches. Russia announced that it had fired shots at a British ship close to the annexed Crimean peninsula. The US’s Federal Reserve’s Open Markets Committee (FOMC) mid-month meeting struck a noticeably more hawkish tone as inflation concerns persisted.
EquitiesDeveloped market equity indices broadly delivered positive performance in June, although there was some weakness in Asian markets. The Federal Reserve’s stance following its mid-month meeting negatively impacted market sentiment.
Government bondsGovernment bond yields fell across the US, UK and Europe. Despite the wobble in market sentiment after the FOMC meeting, when bond yields increased, these declined shortly after with a subsequent flattening of the yield curve. The EU issued EUR 20bn of bonds to support its pandemic recovery fund; the issuance attracted near-record demand.
Corporate bondsCorporate bond performance was positive once again in June. Riskier high yield bonds continued to outperform investment grade for yet another month. Local currency emerging market credit indices were outperformed by hard currency equivalents as the US dollar made gains.
CurrenciesThe US dollar strengthened significantly in June against all major developed market currencies. It was supported by the projections of future US rate hikes and by uncertainty about the rapid spread of the Delta variant and vaccine efficacy. Russia hiked interest rates, the third time this year, resulting in the Russian ruble ending the month up against the US dollar. Similarly in Brazil, interest rates were increased for a third time so far this year, resulting in a significant increase for the Brazilian real against the US dollar.
CommoditiesJune was, overall, another strong month for commodities. Precious metals were the exception, making losses as the US dollar strengthened after the FOMC meeting. Natural gas was the standout performer, off the back of concerns about supply. Oil prices increased, in line with forecasted demand increases.

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