Equity hedge funds see best start since 2013 fueled by Asia bets

Bloomberg

Equity hedge funds are getting a pick-me-up after a harsh 2016, when they suffered almost a third of the industry’s withdrawals, amid a global stock rally.
The long-short strategy — the top performer — returned 3.2 percent in the first quarter on an asset-weighted basis, marking the best start to a year since 2013, according to Hedge Fund Research Inc. Emerging markets had some of the most robust gains, with an average 5.5 percent return led by wagers in India and China.
Managers benefited from a surge in equity markets in Europe, the US and emerging markets in the quarter after increasing their net long exposure to those markets, according to prime brokerage data. While sustained gains are vulnerable to risks including the presidential election in France, challenges to US President Donald Trump’s agenda and rising interest rates, they also provide a chance to make money, according to Man FRM, a unit of Man Group Plc that invests in hedge funds.
“There is a pleasing array of sources of macroeconomic risk and potential opportunity for hedge funds,” Man FRM wrote in a note on April 4. “Trading any one of these successfully is rightly difficult (we don’t pay hedge fund fees for nothing), but at least this year there appears to be enough breadth of opportunity for hedge funds to potentially prove their worth.”

EQUITY LEADS THE PACK
Composite Index 1.7% Equity Hedge Index 3.2% Event Driven Index 2.7% Macro Index 0.5% Relative Value Index 1.9%. US stocks jumped in the first quarter, with the S&P 500 Index returning 6.1 percent, while the 16 major currencies tracked by Bloomberg all rallied against the dollar. Investment-grade dollar bonds rose 0.8 percent and junk bonds jumped 2.7 percent, according to Bloomberg Barclays US indexes.
The Euro Stoxx 50 Index returned about 7 percent over the period, and the MSCI Emerging Markets Index soared 11 percent, the most since 2012. Light Street Capital Management, a $915 million long-short equity fund that specializes in technology, media and telecommunications, surged 20.3 percent in the first quarter, according to people with knowledge of the matter.
The firm, run by Tiger Cub Glen Kacher, benefited from bets on social media, e-commerce and cloud and mobile technologies, the people said. Viking Global Investors, led by another Tiger Cub, or manager who once worked at Julian Robertson’s Tiger Management, gained 4.9 percent this year, according to a person with knowledge of the returns.