Systematic hedge funds are having an especially rough time navigating the seesawing markets so far in April. Many prominent funds have reported big losses in the first two weeks or so of the month, according to II‘s analysis of HSBC’s latest data.
Many of the struggling funds are trend followers, commodity trading advisors, whose algorithms are designed to latch on to short-, medium- or long-term trends in a range of highly liquid markets, including stocks, currencies, rates, and commodities.
The performance of the funds are through April 11, with a few from as late as April 15 — so they don’t include the huge surge in the equity markets on Tuesday and Wednesday. But they do provide a glimpse into how the global market sell-off is impacting various hedge fund strategies.
For example, the Tulip Trend Fund dropped nearly 16 percent through April 11, bringing its decline for the year to almost 32 percent. In March, its losses were driven by stocks, according to its monthly letter.
Aspect Diversified Fund, a medium-term trend follower, fell 13.4 percent through April 11 and is down 17.14 percent for the year.
The Systematica BlueTrend fund reported an 11.3 percent loss over the first 11 days of the month and is off 20.4 percent for the year. It is a trend-following program focused on key asset classes including equities, fixed income, foreign exchange, energies, metals, and agricultural commodities.
Welton Global, a multistrategy global macro program, dropped 8.9 percent in the first ten days of April, extending its loss for the year to 15.7 percent.
A number of MAN AHL systematic funds are also struggling so far this month. AHL Diversified was down about 9 percent for the month through April 11 and 16.2 percent for the year. MAN AHL Evolution Frontier was off by 6.1 percent through April 11 and 10.7 percent for the year. MAN Alpha declined by 5.9 percent through April 11 and 10.1 percent for the year. AHL Dimension dropped 5.25 percent and 7.22 percent, respectively.
Elsewhere, Renaissance Institutional Equities Fund lost 5 percent for the month through April 11. However, it remained up 6.9 percent year-to-date. RIEF trades global stocks and derivatives with the goal of achieving a long-term risk-adjusted return that, on a gross basis, exceeds that of the fund’s benchmark index — the Standard & Poor’s 500 — while attempting to maintain relatively low beta and volatility to the index, according to a regulatory filing.
High-profile equity funds fared better. For example, Tiger Maverick Fund was off by just 1.1 percent through April 11 and is still in the black for the year, up 2 percent.
Several managers did perform well in early April. Saba Capital Carry Neutral Tail Hedge Fund rose 7.9 percent this month through April 11, boosting its gain for the year to 11.85 percent.
According to Saba Capital, the fund seeks strong absolute returns during periods of market stress and dislocation by investing primarily in credit default swaps on a portfolio of low-spread investment-grade companies. Saba explains that it opportunistically buys credit default swaps on indices and high-yield companies, as well as equity puts and related instruments. “By using proprietary tools and active portfolio management, Saba aims to generate alpha relative to tail hedges that rely more heavily on passive index strategies.”
Saba Capital Master Fund, the firm’s flagship, also had a strong start to the month, gaining 7.4 percent through April 11. It is now up 4.1 percent for the year. The credit relative-value fund seeks to identify dislocations across the capital structure. It uses a long-short, market-neutral approach in credit and equity markets.
Institutional Investor previously reported that Valiant Capital Partners, a fundamental equity long-short fund, was up 9 percent for the month through April 15, hiking its increase for the year to 13 percent, according to the Tiger Grandcub’s first-quarter letter.
