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Hedge Funds Up In June To Conclude Wild First Half Of 2020

Hedge funds made gains in June for the third consecutive month, concluding a volatile first half of the year defined by a steep Q1 global equity market decline driven by the global coronavirus pandemic followed by a mixed recovery in the second quarter despite ongoing virus concerns and challenges. The investable HFRI 500 Fund Weighted Composite Index gained +1.5% in June, driven by advances in Equity Hedge and Event-Driven strategies, narrowing the H1 decline to -2.4%.

The HFRI Fund Weighted Composite Index gained +1.9% in June, reducing the 1H20 decline to -3.5%, as H1 performance was led by Technology, Currency, and Healthcare strategies.

Equity Hedge (EH) led industry performance in June as global equities advanced despite ongoing coronavirus risks as well as social unrest and protests. The HFRI Equity Hedge (Total) Index gained +3.0% for the month, concluding 2Q20 with +13.6% return, while the investable HFRI 500 Equity Hedge Index advanced +2.9% in June. Equity Hedge sub-strategy performance was led by Technology exposure, with the HFRI EH: Technology Index surging +7.3% for the month, bringing the first half return to +12.7%, leading all sub-strategies. The volatile HFRI EH: Energy/Basic Materials Index continued its sharp 2Q recovery in June, advancing +1.8% for the month to finish the quarter up +15.0% after falling -14.9% in Q1.

Event-Driven (ED) strategies also advanced in June, with the investable HFRI 500 Event-Driven Index gaining +2.0%, while the HFRI Event-Driven (Total) Index posted a similar +1.9% return. ED sub-strategy performance was led by Activist and Merger Arbitrage exposures, with the HFRI ED: Activist Index advancing +4.7% for the month, while the HFRI ED: Merger Arbitrage Index added +2.3%.

Fixed income-based Relative Value Arbitrage performance was led by corporate credit and traditional Convertible Arbitrage exposures in June, as the investable HFRI 500 Relative Value Arbitrage Index advanced +1.6% for the month, while the HFRI Relative Value Index returned +1.8%. The HFRI RV: Fixed Income-Corporate Index gained +3.2% in June, while the HFRI RV: FI-Convertible Arbitrage Index and the HFRI RV: FI-Sovereign Index advanced +2.9% and +2.8%, respectively, for the month.

Risk Premia and liquid alternatives strategies also gained for June, led by the HFR Bank Systematic Risk Premia Commodity Index, which advanced +3.9%, bringing the H1 performance to a gain of +15.4%. The HFRI-I Liquid Alternative UCITS Index advanced +0.7% for the month, led by a gain of +1.3% in the HFRI-I Relative Value Index. Risk Parity strategies also advanced for a third consecutive month, as the HFR Risk Parity Vol 15 Index gained +2.8% in June.

Macro strategies posted mixed performance in June, with declines in Managed Futures and Commodity strategies only partially offset by gains in Currency and Fundamental Discretionary strategies. The HFRI Macro (Total) Index fell -0.5% for the month, bringing the H1 return to -1.1%. The HFRI Macro: Commodity Index and HFRI Macro: Systematic Diversified Index declined -1.5% and -0.9%, respectively, last month. The HFRI Macro: Currency Index led Macro sub-strategy performance for the month, gaining +1.8% to end H1 with a +6.3% return, while the HFRI Macro: Discretionary Thematic Index added +1.1% in June to increase its 1H20 performance +2.6%.

Nearly half of all hedge funds posted positive performance in the first half of the year, with the top quartile of funds advancing +14.8%, while the bottom quartile declined -19.7%. The top decile of all HFRI constituents surged +25.0 percent through the first six months of the year, while the bottom decile declined -27.9%.

“Hedge funds gained in June to conclude a strong 2Q, which nearly offset declines from the coronavirus pandemic-driven equity market panic from 1Q20, with a number of exposure areas, including Technology, Currency, Healthcare, and Fundamental Discretionary Macro posting gains for 1H20,” stated Kenneth J. Heinz, President of HFR. “Despite the strong 2Q recovery, risks and realized volatility associated with additional virus contagion, social unrest, and the upcoming US election remain elevated. Funds which have demonstrated their strategy’s success and resiliency through 1H volatility are likely to lead industry performance and growth in 2H20.”


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