Activist hedge funds lead gains in turbulent month of December
After a series of currency shocks, a plunge in the price of oil and policy surprises at several central banks in recent weeks and months, hedge fund investors are reorganizing their portfolios to prepare for heightened volatility in 2015, according to industry analysis firm Hedge Fund Research (HFR).
‘Extreme dislocations across financial markets in recent weeks, encompassing the dramatic slide in oil, negative sovereign yields and the abandonment of the Swiss franc/euro cap, have sharply elevated expectations for volatility, significantly increasing both the opportunities and risks for investors in early 2015,’ says Kenneth Heinz, president of HFR, in a press release.
As volatility increased toward the end of last year, mainly due to the plunge in oil prices and the rise of the dollar against other currencies, investors sought to shift their portfolios toward stocks and other assets that could benefit from the price swings and away from those that looked to suffer, increasing the general level of risk in the market.
Amid the volatility in December, activist hedge funds posted an average increase of 2.5 percent on the month, even as funds with other event-driven strategies declined by an average of 0.1 percent, HFR says in a separate press release. Activist hedge funds ended the year with a gain of 4.8 percent.
The HFRI Fund Weighted Composite Index, HFR’s broadest measure of hedge fund performance, was little changed in the month with a gain of 0.3 percent. For the year, it ended up 3.6 percent, far below the long-term average gain of 10.7 percent, as ‘hedge fund managers maintained conservative exposures with equity markets near record highs,’ HFR says.
Among regional indexes, the HFRI Emerging Markets: Russia/Eastern Europe Index plunged 7.3 percent in December, bringing its losses to more than 25 percent for the year. The Latin America Index fell 4.1 percent in the month and 9.1 percent in the year. The biggest gainer, regionally, was the China index, which increased 1.9 percent in the month and 5.7 percent in the year.
