Monthly Hedge Fund Trends – April 2014 (Deutsche Bank)

April 2014

KEYWORDS: China, European Central Bank, European Union, Emerging Markets, Hedge Fund Managers, Asia, Michael Spencer, Volatility, Macro, long/short equity, multi-strategy funds, CTA, managed futures, United Kingdom, commodities, AIFMD, ESMA, Volcker Rule, ETFs, UCITS, Office of the Comptroller of the Currency, cyber-security, SEC, Securities and Exchange Commission

Authors:

Deutsche Bank

Organizations:
  • Deutsche Bank

Summary:

Key findings in the report:

-          The Global Strategy team highlights an emerging markets recovery for the month of March from oversold levels. They reason that although the bounce might not be fundamentally driven, some investors may be interpreting weakness in the Chinese economy as a precursor to easier monetary and/or fiscal policy. It is noted that while China enters a turbulent phase, the contrarian trade continues to work well within global emerging markets. Next, the European Economics research team discusses the implications of inflation concerns and the potential for the ECB to use unconventional methods to alleviate these concerns should inflation related data sour over the next few months.

-          The Hedge Fund Capital Group hosted their 15th Annual “Bridging the Gap” conference last month attracting a record 230 international allocators and 78 global hedge fund managers resulting in 2,100 small group meetings. From their regional meetings throughout the month, the team highlights that Texan investors are looking for exposure to emerging managers, event and direct lending strategies and non-US markets while European investors are focused on low beta equity strategies. The team in Asia hosted their semi-annual investor luncheon featuring Deutsche Bank’s Chief Economist in the Asia Pacific region, Michael Spencer.

-          Volatility caused by uncertainty in the global macroeconomic outlook contributed to mixed returns in March with the median fund losing 0.17% globally bringing year-to-date performance for the median global fund to +1.18%. Global gains last month were led by emerging markets equity (+1.02%) and fixed income (+0.72%) strategies, while equity l/s and macro strategies struggled, down 0.20% and 0.35%, respectively. Regionally, credit strategies performed well in the US (+0.80%), fixed income was the top performer in Europe (+0.71%) and multi-strategy funds fared best in Asia (-0.07%). Global dispersion of returns was highest in March for emerging markets equity and CTA / managed futures funds.

-          In securities lending, the UK food retail sector was shaken up by earnings surprises and the potential for a widening price war. Merger activity was present in the European mining industry while convertible issuances began to slow. Short interest began to build in fuel cell companies during March and Cliffs Natural Resources saw a proxy vote catalyst of ongoing consideration. China’s Shanghai Chaori become the first domestic bond issuer to default bringing the health of China’s corporate debt market into the spotlight.

The European Securities and Markets Authority (ESMA) published updated Q&A on reporting requirements under the AIFMD in addition to revising its Asset Management Guidelines relating to ETFs and UCITS. In the US, the Office of the Comptroller of the Currency (OCC) became the first agency in charge of the Volker Rule to release a report estimating the cost of implementing the legislation and the SEC hosted a roundtable meeting to discuss cybersecurity issues.

Related Research and Data