The company’s widely-followed HFRX Global Hedge Fund Index rose +0.86% during the month. For the full year, the measure gained +2.5%. The HFRX Market Directional Index, meanwhile, rose +1.73% for the month and +9.9% for the year.
HFR attributed the strong performance to gains in global equities and a continuation of November’s rise in bond yields, although the data firm noted a flattening in the U.S. yield curve during the month. Elsewhere, hedge funds benefited from further gains in the U.S. dollar, especially against the euro, Japanese yen and British pound.
Performance highlights from HFR’s December report:
- The HFRX Event Driven Index posted a gain of +1.92% for December and +11.1% for the year, its best yearly performance in three years, from gains in Distressed/Restructuring, Special Situations equity and Merger Arbitrage managers.
- The HFRX Distressed Index gained +1.87% for the month ending the year with a +19.7% gain, the best yearly performance since 2003 and the 3rd best year since the index inception, from exposure to the U.S. Financial, Energy/Basic Materials and Consumer sectors. The HFRX Special Situations Index posted gain of +1.98% for month and +8.7% YTD, while the HFRX Merger Arbitrage Index gained +0.75% and +4.3% YTD.
- The HFRX Relative Value Arbitrage Index posted a gain of +0.83% for December from gains in Fixed Income and Yield Alternatives – Energy Infrastructure strategies. Despite steady increases in global fixed income yields, HFRX RV: Multi-Strategy Index gained +0.74% while HFRX Fixed Income – Credit Index rose +1.04% in December and +5.0% YTD.
- The HFRX Convertible Arbitrage Index gained +0.75% for the month, +5.76% YTD, its best yearly performance in 3 years.
- The HFRX MLP Index posted a gain of +5.06% and +29.2% for 2016, its best yearly performance in 6 years.
- The HFRX Equity Hedge Index posted a gain of +0.18% for December as U.S., Japan, Australia and European equity markets rose, while China declined and other Emerging Markets were mixed for the month. The HFRX Fundamental Value Index posted a gain of +0.85% and +3.6% YTD, its best yearly performance in the past 3 years, from gains in US large-cap in the Financial, Consumer and European equities.
- The HFRX Macro/ Index posted a gain of +0.48% for December from systematic trend-following managers. The HFRX Systematic Diversified CTA Index gained +0.62% for the period as Energy commodities rallied, Metals declined and Agriculturals traded in a wide range as the dollar strengthened against all major currencies.
Established in 1992, HFR is a global leader in specializing in the indexation and analysis of hedge funds. The company produces the HFRI, HFRX and HFRU Indices, industry benchmarks for global hedge fund performance, and calculates over 100 indices ranging from industry-aggregate levels down to specific, niche areas of sub-strategy and regional investment focus.