Hedge Fund Leverage Moving Higher – ValueWalk Premium

Hedge Fund Leverage Moving Higher

December was a strong month for hedge funds, a JP Morgan Prime Brokerage report on global hedge fund trends reported. At the end of 2016, there was a decided trend among institutional investors to favor investment managers “that are less correlated to the markets” and those in “niche and off-the-run” strategies, particularly in the US. In the January 19 report, manager shifts among strategies were noted, particularly in Europe and Asia.
2016 Hedge Fund Letters

Event driven funds up 1.47% in December, up 10.22% on the year
The hedge fund strategy winner in December was Event Driven funds, up 1.47% basis JP Morgan’s survey. Relative Value funds followed, up 1.20% on the month, with Macro funds, up 1.17%. Those strategies were up on the year 10.22%, 7.82% and 1.49% respectively.

Event Driven managers benefited from strong US equity markets amid higher government bond yields, two typically negatively correlated factors. The Activist Index, a sub-category, rose 2.5% in December.

Among Relative Value strategies, Alternative Yield strategies were up 2.6% and are the leading strategy in the category on the year, up 17.6%.

In the Macro category, CTA strategies delivered the bulk of positive returns as did Macro funds with Energy exposure. The commodity markets were the biggest winner in December, up 5.56% in December, more than doubling the S&P 500 Total Return Index, which generated 1.98% on the month. On the year commodities finished 2016 up 27.7% while the S&P 500 was up 11.96%.

Leverage generally moving higher
Gross leverage increased across most strategies on the month, with Multi-Strategy funds bucking the trend. Market Neutral strategies, up 5% on the month, remain at the highest leverage levels among all funds at over 50%. Convertible Arbitrage, up 4.5% on the month, quickly follows as having high leverage after a noticeable jump from October to November.

SORRY!

This content is exclusively for paying members.

If you are subscribed and having an account error please clear cache and cookies if that does not work email [email protected] or click Chat.


X
Saved Articles
X
TextTExtLInkTextTExtLInk

The top investors are reading ValuewalkPremium.

Click here to learn why

0