Hedge funds have started 2019 on a strong note recording positive performance in the first month of the year.
Data from industry tracker eVestment showed that the global hedge fund industry returned 3.9% in January. This reverses a trend of declining returns over the past five months, and marks a considerable recovery from 2018 when hedge funds recorded an aggregate return of -5%.
Funds with exposure to Brazil, Russia and China have been the biggest winners so far this year. Brazil-focused strategies returned 10.7%, while those investing in China and Russia gained 7% and 6.4%, respectively.
‘These funds have a long way to go to make up for their negative returns in 2018, as low as -16.6% for China-focused funds in 2018, but the positive returns are likely to be welcomed by investors in these funds,’ said eVestment’s global head of research Peter Laurelli.
On the other hand, India-focused funds continued to be in the red last month, losing 3.8%. Funds investing in India fell by 16.4% in 2018.
Last year, the hedge fund industry had its worst performance since 2011 on the back of market volatility, trade tensions between the US and China and significant depreciation of emerging market currencies.
However, going into 2019, private banks are continuing to invest in hedge funds as they turn to alternative investments for diversification amid concerns of future market volatility.
For example, UBS Global Wealth Management is recommending exposure to multi-strategy funds and market neutral approaches. UOB Private Bank, meanwhile, is overweight global macro funds and neutral on long/short equity strategies.
Long/short equity strategies have also started the year with a bang, returning 6% in January, eVestment data showed.
Besides long/short equity funds, other top performing strategies were distressed funds, returning 4.8%, and event-driven activist funds, which gained 4.2%.
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