The HSBC AsiaHedge index statistics could suggest a comparative lack of direction for hedge funds in performance terms this past month. The composite index was all but static in May – suggesting a veritable Sargasso Sea of dull financial markets. The index put on just 0.21 percent for the month.
While that does not look like much on a chart, May’s horizontal progression belies the fact that many strategies have to deal with some of the most difficult investment conditions. These markets have been testing managers to their limits, encouraging investors to stay focused, to stick to their systems, and not to be fazed, perhaps, by the expectations of less understanding investors.
May’s Asia-Pacific performance returns where somewhat as to be expected. In markets that ended down, hedge funds protected capital and paid attention to minimizing their losses. In markets that ended up on the month, hedge fund performance has been slower to pick up. This is quite normal. Out-performance by hedge funds in blue water, trending bull markets, tends to occur over a comparatively longer time span.
Yet these are hardly the conditions are not evident now.
Encouragingly, both of the regional indices have bettered the major market benchmarks. Asia including Japan – 0.04 percent versus -0.68 percent for the MSCI Pacific Free – and Asia excluding Japan – 0.11 percent versus -0.07 percent for the MSCI Pacific Free ex Japan – both outperformed the benchmarks. In the case of the latter this is particularly encouraging given that ex-Japan managers have much to do to justify the particular favor that investors have shown in them over the past 12-18 months.
On the other hand, both Australia – 1.51 percent versus the ASX 100’s 3.23 percent -and Japan lagged – 0 percent versus the Nikkei’s 2.43 percent – in up-markets. Not that this should in any way signify the beginning of a trend. Most experts expect these overly directionless conditions to continue.