According to the Lyxor Alternative Investment Industry Barometer, the Lyxor Hedge Fund Index was only down 0.4% compared with the MSCI World Index, which lost 3.8% over the month.
It said after three weeks of “tactical retracement” to take in the rally witnessed at the end of last year, several events in emerging markets contributed to hurting both their economies and those of developed nations, while relative value strategies fared better.
The group raised concerns over weak PMI data in China and concerns over the vulnerability of its shadow banking as well as instability in Turkey, Argentina and Ukraine.
Lyxor said that long/short equity funds had started 2014 stronger through shaving their gross EM exposure by around 10%, but net exposure has suggested hedge funds have not yet accepted an EM contagion scenario.
“With a strong overall exposure to cyclical sectors though, their average market beta continued to hover around 35%. Rising equity dispersion, the start of the earnings season, and healthier short trading conditions were favourable to variable and market neutral bias funds. They outperformed long bias funds prior to the sell-off. Afterward, European funds outperformed their US peers.”
Meanwhile Lyxor said the equity losses incurred by global macro funds during the sell-off were offset by gains earlier in the month.
Long duration US and EU equities ended flat, with a growing opportunity through the developed world’s central bank dispersion and relative value trades in EM, the group said.
