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State of the Industry: June 2018

Raheem Shahid Senior Associate, Client Analytics

Most of the eleven sectors performed well in June. Real Estate and Consumer Staples were the strongest performers, posting 4.33% and 4.56%.

For the interactive version of this report, please head to our Novus State of the Industry report.

Business and economic indicators including retail sales, employment, equity earnings, and oil gains contributed to a positive month for US markets. This was reflected in the S&P 500, which had a gain of 0.60%, bringing the YTD performance to 2.72%. Nikkei 225 witnessed a positive gain of 0.55% as well, whereas political and economic issues in Europe continue to adversely affect those markets. Euro Stoxx 50 was the only major index to post a negative return (down 0.25%) in June, further dragging the YTD return down to -0.79%.

The Hedge Fund Universe (HFU) was up 0.62% last month, resulting in an all-positive return streak for Q2. The HFU posted a strong second quarter, 4.35% QTD, bringing YTD performance to 3.85%. The gap between HFU and S&P 500 widened as the quarter progressed, suggesting a continuation of alpha generation within the hedge fund industry (if subtle).

Most of the eleven sectors performed well in June. Real Estate and Consumer Staples were the strongest performers, posting 4.33% and 4.56% respectively. Energy stocks led the market in the second quarter, posting 13.5% QTD. West Texas Intermediate (Oil) is up 22.7% YTD after closing at $60.42/b, mainly due to increasing global demand and a response to sanctions on sales of Iranian oil. From an alpha standpoint, seven out of eleven sectors have added alpha YTD.

Like last month, Novus Concentration outperformed its cousin indices, up 5.34%. This brings QTD return to 18% and YTD to 20%. The lead continues to expand against the flagship Novus Conviction Index, currently at 9.55% YTD. CVNA and GHDX were the outsized performers within the Concentration Index, whereas only 6 out of the 20-stock portfolio detracted value.

In contrast with May, it was small managers who made the top 5 list of best HF performance during June. Mill Road Capital was up 24% MTD and 45% YTD, mainly driven by Noodles & Co, their largest position in the portfolio.

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