Equity funds battered, CTAs rally as market mood turns febrile in April

May 22, 2014  

European and global equity funds bore the brunt of the turbulent market conditions in April as hedge funds struggled to cope with a sharp outbreak of intra-month volatility – with May looking likely to have been an equally difficult month for many long/short equity players.

Although equity markets generally finished higher after a febrile month, April was marked by some savage movements in individual stocks as a result of massive investor rotation out of momentum and cyclical stocks – notably in the tech and other growth sectors.

Although the overall EuroHedge Composite index was fairly flat on the month – showing a loss of just 0.1% at this stage – many long/short equity funds suffered some big drawdowns in what was a fairly tumultuous month.

With numbers in from about 80% of the funds reporting to the EuroHedge database, the European equity long/short index for dollar-denominated funds is showing a median loss of around 1.3% on the month – its worst performance since May 2012 – on top of the 0.7% loss in March, although the median return for euro-denominated European equity funds is much better at just -0.25%.

Global equity funds fared equally poorly in April – with the median return for dollar-denominated global equity long/short managers also showing a loss of 1.3% on the month, and with the index for euro-denominated global equity funds standing at around -0.8%.

By contrast, the embattled managed futures sector had a rare positive month – with the median index up by around 0.8% for CTAs in April – while the medians for credit and emerging market debt funds were also positive on the month.

Among individual equity funds, Odey European was among the biggest losers – down by almost 8% in April for a year-to-date loss of more than 12% after the first four months of the year – while Tosca Mid-Cap also fell by more than 8% on the month, taking the fund into negative territory for the year at -6%.

Clareville Capital’s UK-focused Pegasus fund was also a prominent casualty in April’s hyper-volatile markets – dropping 10% on the month – while Lansdowne European Equity was down by around 5% and New York-based Dabroes took a 5.75% hit.

In global equity, Bremner Fundamental was down by over 10% in April, while the big Lansdowne Developed Markets Fund took a tumble of more than 7%. Algebris Global Financials also suffered, dropping almost 7%, while Sloane Robinson’s SR Global Fund lost 6.6% and Jabre Global Balanced was off by 4%.

There were some notable outperformers on the upside too in equities. Eurofin Wittenberg Small and Mid-Cap – the new strategy run by veteran managers Steve Alder and Ralph Jainz – was up by over 7% on the month (a full profile of the fund will be published in the May issue of EuroHedge next week), while former BlueGold equity manager Jean-Louis Le Mee produced a 15% return with his Abydos commodities-focused long/short global equity fund.

Rory Powe’s PCM Europe was up by 7.6% on the month, while there were also notable monthly returns for Redstream (the former RAB Energy fund, which was up by almost 10% in April) and RAB Special Situations (which gained almost 7%).

In event-driven, Tyrus Capital was again the outstanding performer – gaining almost 3% in April for a striking year-to-date return of nearly 14% (and a rolling 12-month return of 33.34%), while in macro Laurentia gained 4% for a YTD return of 12% in a month that saw losses of 2% plus for a number of macro funds including OneWall, Brummer Canosa, TT International and ABD Investment. Brevan Howard fell by 1% for a 4% loss so far this year.

In managed futures, meanwhile, a much better month for most trend-following systematic trading strategies saw good monthly returns for a change from a number of leading players in the CTA space including Man AHL Evolution, Discus, SMN, Lyxor Epsilon, Amplitude, QCM, Solaise, Winton and Aspect.

Click here to view the live EuroHedge monthly performance league tables for April

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