Hedge Fund Emerging Markets Index Analysis, April 2015


“The HFRX Emerging Markets Composite Index posted a strong gain of +4.74% for April, the highest gain since May 2009, with contributions from exposure to China and Brazil,” reports Hedge Fund Research, a leading source of hedge fund data and indices.

The index gains were mainly contributed by equity and currencies gains. Emerging Market equities gains were led by China followed by Russia and Brazil. And The US Dollar declined against most currencies, led by declines against the Russian Rouble, Brazilian Real. The Russia’s roble, which had declined from 33 a dollar in January 2014 to 70 a dollar, has recovered smartly and is now trading at around 50 a dollar.

As Russia is the second-largest crude exporter and its economy is largely dependent on oil prices, the rouble’s strength is significantly influenced by oil price. The price of Brent, which had declined to six years low at $45 in January 2015, has started moving up. It has almost touched $70. The sharp increase in Oil & Energy which helped both Russia and Brazil. Chinese equities posted sharp gains pushing up the China Hedge Fund Index which registered the eighth consecutive month of gains.

HFRX Global Hedge Fund Index has also shown improvement, it has gained over 2% YTD compared to decline of half a percent last year. North America index, which had given negative return of (-) 4.13% last year, has come in positive zone with a return of 2.19%. Europe index has also jumped from 1.73% last year to over 5% YTD. Equal Weighted Strategies Index has also gained by over 2% YTD as against loss of 0.5% in 2014.  Market Directional Index has contributed significantly with around 5% gain in current year.

Global equity markets posted gains for the month. HFRU Equity Hedge Index has posted a gain of 7.4% YTD. In April, it was up by 1.45%. Within equity broad group, he HFRX Fundamental Growth Index posted a strong gain of +5.51% for April, its largest monthly increase in almost last six years.

Event Driven Hedge Fund index gained about 2% as against decline of 4% last year. Growing restructuring activities in the US Energy, Communications and Consumer sectors pushed up Distressed index and similarly increase in M&A activities resulted in gain to Merger Arbitrage Index. Special Situations Index posted a gain of +0.22%, with contributions from Core positioning in selected companies have enabled to gain around 2% as against loss of 6% last year. These three sub sectors were the main contributors in making Event Driven index a U-turn.

Global credit strategies and taking proper positions in credit and volatility has helped Relative Value Arbitrage Hedge Funds. Its Index posted a gain of 2.63% YTD as against negative performance of (-) 3.14% in 2014.

But Macro/CTA Index was worst affected with a decline of -2.67% in April, the first monthly decline in 12 months. This has pulled down YTD gain to less than half a percent as against over 5% last year.

To conclude, Hedge Funds have started with a good positive gains as against negative performance last year. The hedge funds registered gains in the last four consecutive months of the current year. All Hedge Fund Indices have recorded positive return YTD. Emerging Markets focused Hedge Funds are taking the lead with around 4% return in the first four months of 2015. Hedge Funds managers seem to be on path of achieving good performance in 2015.