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How will hedge funds fare in 2021?

by LLB Editor
12th Jan 21 11:18 am

The Eurekahedge Hedge Fund Index was up 3.41% in December 2020, supported by the strong performance of the global equity market as represented by MSCI ACWI (Local0 which gained 4.04% during the month. In 2020, global hedge funds ended the year in double-digit performance with 11.77% return, recording their best annual performance in over a decade, despite the ongoing pandemic crisis. In the earlier months of 2020, the widespread of COVID-19 forced non-essential businesses to temporarily cease their operations. This in turn caused a shutdown of broader economic activity resulting in the sharp increase in unemployment rate.

Unemployment rate reached 14.8% in April 2020 in the US – a level that has not been seen since the Great Depression. However, risk assets made a strong comeback since end-March, supported by the massive economic stimulus, low-interest rates, reopening of the major economies, and positive development of COVID-19 vaccines which boosted the performance of the global equity market. Over the month of December, global hedge funds benefitted from the strong rally of risk assets driven by the deployment of several COVID-19 vaccines and the passage of the new COVID-19 relief bill in the US, which was the second-largest economic stimulus in American history. In the US, NASDAQ Composite was up 5.65% in December, bringing its 2020 return to 43.64% compared to 19.30% of S&P 500. The tech-companies particularly the FAANG group strongly benefitted from the ongoing pandemic as seen from the 80.75% return of AAPL throughout the year. In the same vein, the post-Brexit trade agreement between the UK and EU boosted the performance of the equity market in the region, with the DAX gaining 3.22% during the month, while the FTSE100 returned 3.10% over the same period respectively.

Returns were positive across geographic mandates in December with North American hedge funds gaining 3.99%, outperforming their Asia ex-Japan and European peers who returned 3.26% and 2.39% respectively. Across strategies, CTA/managed futures, long/short equities, and event-driven fund managers were up 4.24%, 4.17%, and 3.66% respectively throughout the month.

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