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Hedge funds surge against backdrop of market volatility

Hedge funds surgeHedge funds have surged as equity, currency and fixed income markets saw volatility at the end of January.

Hedge Funds Research’s (HFR) fund weighted composite index gained 2.8% for the month, the strongest monthly return since September 2010 and the best January return since 2006. The gain extended the streak of consecutive monthly gains to 15.

Macro strategies saw healthy performance, with the HFRI macro (total) index climbing 3.7%, the best monthly gain since February 2008.

Equity hedge funds also surged in January, with the HFRI equity hedge (total) index advancing by 3%, led by technology and emerging markets exposures.

Volatile cryptocurrency and blockchain funds fell in January as cryptocurrencies fell sharply, with the HFR blockchain index falling 9.2%. The HFR Blockchain Index surged 2,798% in 2017. 

Kenneth J. Heinz, president of HFR, said hedge funds began 2018 extending strong gains, even though volatility associated with global equities, currencies (including cryptocurrencies), commodities, fixed income and the outlook for global inflation all increased.

He added: “Hedge funds will continue to navigate these volatile markets and asset classes in 2018, monetising opportunities generated by US tax cuts and infrastructure spending, US monetary policy, and corporate mergers and acquisitions and special situations. These themes are likely to drive performance and industry growth in 2018.”

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