Macro gains offset by equity losses

US Federal Reserve chief Ben Bernanke is expected to discuss the possibility of tapering its mass asset-purchasing programme at a policy meeting today - London-based exchange-traded product provider Boost ETP has added Morgan Stanley to its list of authorised participants - Franklin Templeton has named Jill Barber as head of institutional for UK and Ireland as the firm looks to grow its institutional channel - Data provider Markit has acquired the assets of the Depository Trust & Clearing Corporation’s (DTCC) corporate actions data service after increasing customer demand for an outsourced service managing corporate actions - Societe Generale Securities Services will set up operations in Ghana in a bid to develop its custody services offering in sub-Saharan Africa - Mirabaud Asset Management has hired Axa Framlington’s Anu Narula as global head of its equities division - Lyxor Asset Management has teamed up with hedge fund firm TIG Advisors to launch the Lyxor / Tiedemann Arbitrage Strategy fund, a new UCITS vehicle focused on mergers and acquisitions - FTSE will introduce a new ‘food, agriculture and forestry’ sector to its range of environmental markets indices - European fixed income trading venue MTS is set to launch MTS Swaps, a new platform that will give buy-side institutions the ability to trade interest rate swaps electronically - NYSE Euronext's derivatives business has added Chinese broker Zhujiang International Futures as a member of its London derivatives market, NYSE Liffe - Societe Generale Securities Services (SGSS) is setting up in Tunisia in a bid to extend its custody operations on the African continent - BNY Mellon has extended its mandate with the US arm of ING Investment Management. The bank will now provide fund accounting and administration, custody, and transfer agency services for two savings plans - French asset manager Amundi plans to strengthen its relationships with external distributors by creating a dedicated global business line - Fitch Ratings has revised India's Outlook to Stable from Negative and affirmed its Long-Term Foreign- and Local-Currency Issuer Default Ratings at 'BBB- - UBS MTF dark pool, the multilateral trading facility of Swiss bank UBS, has joined TMX Atrium’s network - FTSE Group has opened a dedicated office in Dubai. The new unit, housed within the Dubai International Financial Centre (DIFC), has been set up to develop the index provider's presence in the Middle East and Africa -

Issue 62 - June 2012

Macro gains offset by equity losses

Friday, 15 June 2012

Hedge funds post declines in volatile May; systematic macro post gains on fixed income

Hedge funds posted decline in May, with the HFRI Fund Weighted Composite Index posting a loss of -1.6%, says Hedge Fund Research, Inc., the indexation, analysis and research provider for the global hedge fund industry. This marks the third consecutive monthly decline, reducing the year to date gain for the index to 2.5% through May. “During the volatile month of May, investors reacted to increased European bank and sovereign bond risk and weakening U.S. economic data by aggressively moving portfolios toward less risky exposures,” explains Kenneth J Heinz, president of HFR. “This

risk-off response adversely impacted certain areas of equity-sensitive hedge fund exposures, while benefitting strategies tactically positioned to insulate portfolios and produce gains resulting from the strong trends and volatile environment which materialised. In the current environment, at some level, every hedge fund is a Macro fund.”

Mirroring trends across financial markets, hedge fund performance during May was widely divergent across strategies, with macro funds posting their best monthly performance since April 2011, while equity hedge posted its largest decline since September 2011. The HFRI Macro Index gained 1.7% in May, bringing YTD gains to 1.9%, with significant contributions from systematic strategies and positions in fixed income, commodities and currencies, with limited aggregate exposure to equity market volatility. The HFRI Macro: Systematic Diversified Index gained 4.1% in May and has gained 2.9% year to date.

The HFRI Equity Hedge Index posted a decline of -4.1% in the month, paring its year to date gain to +1.8%, with declines across growth, energy and emerging markets strategies only partially offset by short bias funds, which gained over 7%. Event driven strategies fell by -1.4%, paring year to date gains to 3.1%, with weakness in activist, distressed and equity special situations funds. Falling yields and increased volatility failed to offset the impact of credit weakness as Relative Value Arbitrage funds posted a decline of -1.3%, the first decline for this strategy in 2012, narrowing year to date gains to 3.1%, for the global strategy.