In the latest edition of Novus' State of the Industry, we examine factor movements of January 2018, including best performing stocks & funds.
For the interactive version of this report, please head to our Novus State of the Industry report.
Global equities had a bright start in 2018, with the S&P up 5.7% and major indices in the EU (Euro Stoxx 50 up 3.5%) and Asia (Nikkei up 1.5%) also posting solid gains. The Novus Hedge Fund Universe (HFU), which is predominantly U.S. exposure, sat in between with a gain of 4.8% for January.
The pack leader of the month hails from the Novus 4C Indices—namely the Conviction index, which is up over 12%. Consensus exposure followed at 8.5%, meaning both indices reclaimed their 2017 EOY leading positions as we begin 2018.
Based on sector performance in the universe at large, it was an odd month—the traditional HF sectors of consumer, tech, financials, and health care all underperformed the broader market. In contrast, the low HFU exposure sectors of real estate and utilities were outperformers. Given that the HFU IT sector underperformed, it is interesting that the top two HFU alpha-generating names for January are members of FANG (Netflix and Amazon, respectively). This is likely due to strong Q4s for both names.
Stepping over to industry participant performance, RTW continues to perform well, with a simulated performance of over 35% in January. Your writer’s main takeaway, however, is that two larger funds (>1bln in MV) are in fourth and fifth place—Consonance and SRS—on a list that’s usually dominated by smaller funds.
The overall environment is still favorable for market participants, with correlations remaining low (around 8%) and dispersion somewhat elevated.
Considering February’s rocky start, it’ll be interesting to review the landscape once again at the end of the month.