Hedge funds posted excellent returns in January on the back of resurgent risk appetite and rallying equity markets globally, according to the latest report published by Eurekahedge.
The Eurekahedge Hedge Fund Index was up 2.32% during the month, the strongest January return since 2006 while the MSCI World Index gained 4.66% in January.
All regional mandates finished the month with positive returns as risk appetite was given a boost at the start of the year after US leaders reached an agreement to avert the ‘fiscal cliff’.
Better-than-expected corporate earnings added steam to the rally while positive economic data further supported optimism in the marketplace.
Hedge funds across all regions posted positive returns for the month with Emerging Europe and Asian hedge funds leading the way. The Eurekahedge Japan Hedge FundIndex delivered its strongest January return on record (5.25%) and the best monthly return since December 2005, as the expectations of ‘Abenomic’ policies and monetary easing from the Bank of Japan further weakened the yen and provided a boost to stocks. Managers reported gains from sectors with greater sensitivity to the yen, such as consumer discretionary and export driven tech and industrials.
The largest returns in January were delivered by funds focused on the Asia Pacific region – up 3.08% during the month, as the underlying markets posted strong rallies and the local currencies also gained versus the US dollar. Funds focused on emerging markets also delivered strong returns of 3.07% as the heightened risk appetite resulted in positive movements in the underlying assets.
Total assets under management increased by $17.8bn in January, bringing the size of the industry to US$1.79 trillion. Hedge funds posted performance-based gains of $13.9bn as all strategies finished the month in the black. The industry also witnessed net positive asset flows of $3.9bn during the month.