Index reveals first decline since October 2016
There was a decline in hedge fund performance in February as sub-strategies diverged and global equities slipped.
Data from the Hedge Fund Research Institute shows that its composite index fell 1.8% last month, the largest decline since February 2016 and ending a 14-month streak of gains.
Losses in trend-following CTA strategies led the decline but all strategies were weaker in February.
"Hedge funds declined in February for the first time since October 2016, as long latent global equity market volatility soared and US interest rates increased, with certain hedge fund sub-strategies posting impressive, negatively-correlated gains through the volatility spike," stated Kenneth J. Heinz, President of HFR.
HFRI’s index of macro hedge funds posted the largest decline of the month as US equities fell and interest rates rose. The 3.9% drop was the largest since February 1994!
Both Event-Driven and fixed income-based Relative Value Arbitrage strategies declined less than 1% in February, as several sub-strategies posted negatively-correlated gains for the month.
"Despite the decline, the thematic drivers of hedge fund performance have not changed and, in fact, may actually have accelerated throughout the month. US inflation and interest rates, trade negotiations and the newly proposed tariffs, corporate M&A, and continued application of blockchain technology are likely to drive industry performance, creating both long and short opportunities, throughout 2018."
