Hedge funds up in November but potential volatility ahead


Hedge funds were up 0.48% during the month of November, with 2016 year-to-date returns coming in at 3.60%, according to the Eurekahedge Hedge Fund Index.

Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 2.88% in November with its 2016 year-to-date returns at 4.88%. Roughly 56% of underlying constituent funds for the Eurekahedge Hedge Fund Index were in positive territory in November, with majority of them being long/short equities mandated.

North American hedge fund managers posted the best returns among regional peers this month, with gains of 2.07% while among strategic mandates, event driven hedge funds led the tables with gains of 2.13%.

But Eurekahedge has warned on more potential volatility ahead in 2017.

"We believe that 2017 will hold more volatility in store for the markets. While the Trump driven reflation theme could be a positive driver for the US economy, it is too early to discount the damage to the US and world economy from his protectionist trade views," the report said.

"Further a strengthening USD will act as another check on the recovery within the US economy and it is very likely that the Fed might be able to slot only one rate hike in 2017 once the euphoria around 'Trumponomics' is grounded.

"The Eurozone will be another source of anxiety for the markets, where a fledgling economic recovery, a possibly (relatively) painless recovery for the UK post-Brexit and the social tensions arising from immigration would embolden and tilt the odds in favour of Euro-sceptics.

"Across emerging markets, uncertainty arising from Trump's anti-trade rhetoric coupled with the capital outflows could impact growth. The question remains - while Trump moves to America first, will the US Fed follow suit or continue to act as the world’s central bank?"

Hedge funds, Eurekahedge Hedge Fund Index, MSCI AC World Index, North America

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