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Global hedge funds looked to China last month as they generated positive returns overall.
Hedge funds gained 1.2% in January and there was “net buying of Chinese equities (NYSEARCA:FXI) (NASDAQ:MCHI) (NYSEARCA:ASHR), a reversal of the trend of much of last year, even amid China markets posting losses,” Goldman Sachs’ global banking and markets team wrote in a note.
The Shanghai Composite (SHCOMP) fell 6% in January after losing more than 11% in 2023.
“On a global basis, all strategies posted a positive month of performance in January, with fundamental equity L/S and systematic managers leading the pack,” Goldman said. “Our factor model suggests that fundamental L/S performance was driven by alpha both on the long and short side, after several months of negative short side alpha.”
“Systematic macro managers and CTAs also outperformed other strategies, benefitting from equity longs and commodity positions,” the team added. “Though generally positive, performance was mixed across other strategies including credit, event driven, and discretionary macro.”
“Across regions, Americas managers posted stronger gains than Europe and Asia.”
“January continued the positive momentum, albeit in lesser magnitude,” they noted. “While large cap US equities (SPY) (IVV) (VOO) (QQQ) (DIA) were up, returns continued to be driven largely by a handful of mega-cap stocks, a similar dynamic to much of last year, and small/mid-cap stocks (IJR) (IJH) struggled, with the Russell 2000 (IWM) -3.9%.”
“Corporate earnings were bifurcated, with some sectors up double digits and others down the same. While bond returns were essentially flat, rates rose on the back of positive economic data.”