HEDGE FUND DATA 24/11/2020

Monthly hedge fund performance review – October 2020

Hedge Fund CompositeAs market sentiment deteriorated in October, strategies monitored by Aurum’s Hedge Fund Data Engine generated mixed returns. The average hedge fund return in October across all strategies was -0.21%, bringing average YTD performance to 1.20%. Dispersion was slightly tighter than that observed in September.
Long BiasedAs equity markets declined towards the end of October, long biased funds monitored by Aurum’s Hedge Fund Data Engine generated an average return of -0.75% in October, reducing year-to-date gains to 0.57%. Most sub-strategies were negative for the month, with the weakest performing sub-strategy being long biased diversified growth, which was down -1.00%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -0.99% in October, the worst performing strategy both in October and year-to-date. Quant equity market neutral strategies were the weakest performers as high-factor volatility persisted, down -3.05% on average and extending year-to-date losses to -16.30%. Quant Macro/GAA funds delivered better performance, up 0.16%.
Equity Long/ShortThe Equity long/short strategy peer group monitored by Aurum’s Hedge Fund Data Engine returned 0.09% on average in October. Performance was varied among sub-strategies. Mirroring equity market performance in October, Asia Pacific-focused funds were the strongest performers, up 2.18%. European long/short funds were the weakest performers, down -0.92%.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.13% in October. Most sub-strategies had positive performance for the month. The emerging markets macro sub-strategy was the weakest performer, down -0.08%. Fixed income relative value was the strongest performing sub-strategy, up 0.35%.
Multi-StrategyMulti-Strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.51% in October. The largest multi-strategy funds were the strongest performers, funds with AUM >$5bn returned 0.84%, up 14.75% year-to-date. Multi-strategy continued to be the strongest performing master strategy monitored by Aurum’s Hedge Fund Data Engine this year, with year-to-date performance up 9.64% on average.
Major EventsBuoyant investor sentiment at the beginning of the month quickly faded and volatility increased, as rising COVID-19 cases and uncertainty surrounding the upcoming US election weighed on risk assets. Many European countries returned to higher lockdown restrictions. US-China tensions remained elevated, with a $1.8bn US-Taiwan arms deal angering Beijing and the US blacklisting a number of Chinese businesses that had dealings with Iran.
EquitiesUncertainty in the run up to the US election and rising COVID-19 cases negatively impacted investor sentiment in the US, with major indices ending the month down. European equities incurred the most notable losses, as many European countries faced the likelihood of a second lockdown and the resulting economic contraction. Asian and emerging markets fared better. Chinese equities were supported by positive economic data.
Government BondsUS 10-year yields increased by 19bps during the month, despite the decline in US equity markets as the election uncertainty weighed on investor sentiment. As European equities declined, the demand for both peripheral and core European bonds increased. EU COVID-19 recovery bonds issued in October were vastly oversubscribed; Italy rode the wave of demand by buying back shorter dated issues and issuing an $8bn 30-year tranche.
Corporate BondsCorporate bond performance was largely positive during October. US high yield bonds were the strongest performer, outperforming higher quality credit.
CurrenciesSafe haven currencies benefited in October; the US dollar and the Japanese yen both appreciated. Positive economic data supported the Chinese yuan. Turkish lira reached historic lows, as relations between Turkey and the US and Europe deteriorated following the testing of a $2.5bn missile system bought from Russia. The Turkish lira has depreciated over 20% against the US dollar year-to-date.
CommoditiesOil prices fell significantly to the lowest level since May, Brent futures by -11.24% and WTI futures by -11.54%, reflecting the anticipated fall in demand from a deepening lockdown. Natural gas performed strongly, in the face of colder weather and strong exports from the US. Industrial metals benefited from positive Chinese economic data, with copper trading at the highest level in over two years during the month.

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