Hedge Funds Hit New H1 Peak in 2021: HFR

Hedge fund performance advanced in June, extending the streak of consecutive monthly gains to nine and completing the best first half of a calendar year since 1999, driven by optimism regarding the US economic reopening and despite increasing signs of building inflationary pressures in the US and Europe.

The HFRI Fund Weighted Composite Index (FWC) was up 0.4 percent in June for 10% up on the year-to-date, while the investable HFRI 500 Fund Weighted Composite Index advanced 0.2 percent, according to data released today by HFR, indexation, analysis and research firm HFR.

At nine consecutive monthly gains, the index is eyeing its previous most productive period, a period of 15 consecutively positive months ending January 2018. In the trailing nine-month period ending June 2021, the HFRI FWC has surged 22.0 percent.

The performance dispersion of the underlying index constituents increased slightly in June, as the top decile of the HFRI gained an average of +7.6 percent, while the bottom decile declined by an average of -5.5 percent for the month, representing a top-bottom dispersion of 13.1 percent in June compared to a top-bottom dispersion of 12.1 percent in May. For the 1H21, the top decile of the HFRI jumped an average of +38.6 percent, while the bottom decile declined an average -6.9 percent.

The fixed income-based, interest rate-sensitive HFRI Relative Value (Total) Index advanced 0.2 percent while the investable HFRI 500 Relative Value Index posted a slight decline of 0.06 percent, as interest rates declined in June. Sub-strategy performance was led by the HFRI RV: Yield Alternatives Index, which jumped +1.8 percent for the month, while the investable HFRI 500 RV: FI-Corporate Index added +0.6 percent.

Uncorrelated Macro strategies posted a decline in June despite gains in commodity strategies, with the HFRI Macro (Total) Index falling 1.0 percent for the month, while the investable HFRI 500 Macro (Total) Index declined 1.3 percent. Macro sub-strategy performance was led by the HFRI Macro: Commodity Index, which gained 2.9 percent in June, while the HFRI Macro: Active Trading Index added 0.9 percent. The HFRI Macro Currency Index fell 0.7 percent for the month, while the HFRI Macro: Discretionary Thematic Index declined 1.8 percent.

“Hedge funds extended gains in June to complete the strongest first half of a calendar year since 1999, although performance drivers and market sentiment shifted for the month with a moderation of the broader macroeconomic reopening, higher interest rates and inflation trends which have defined the previous three quarters, as interest rates declined and realized equity market volatility remained elevated,” says Kenneth Heinz, president of HFR. “While investor optimism regarding the global reopening remains strong and justified, hedge fund managers and investors are positioning for a dynamic performance environment which may shift rapidly as a function of political developments, new information on virus mutation and vaccine efficacy, as well as demand shifts relating to consumer, technology and energy trends. Managers tactically and opportunistically positioned to monetize opportunities created as well as preserve capital through the volatility are likely to attract institutional investor capital and lead industry growth in 2H21.”