(February 15, 2013) — Leverage across major hedge fund strategies hit 52-week highs in January as performance also moved upwards, research from JP Morgan has shown.
Gross leverage increased from 1.83 to 1.91 (+ 4.6%) in January, a note from the bank’s prime brokerage said today, reporting on its clients’ activity.
“Net exposure for equity long short and market neutral funds increased from 0.72 to 0.78 (+8.3%) while net leverage for equity-based strategies rose from 0.63 to 0.69 (+9.5%)” the note said.
The note said the increase in leverage was connected with the “risk on” environment experienced in global markets in the first month of this year.
“Month-over-month, leverage in the prime brokerage portfolio increased at a rate just below that of the S&P 500 Index,” the note added. “All strategies are running leverage above their average two-year levels except for multi-strategy and high-grade fixed income.”
The bank’s prime brokerage also reported that performance in the sector had improved in the first month of the year.
By the end of January, all major strategies – carried out by JP Morgan’s clients – posted positive performance.
Equity long-short made 3.70%, event driven was up 2.19%, macro hedge funds made 1.62%, and relative value returned 2.53%.
However, these strategies all failed to beat the rising S&P500, which was up 5.18% in the first month of 2013.
Earlier this month, New York City’s five pension funds said they had together allocated nearly half a billion dollars to two hedge funds.