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The HFRI Macro Index declined by -1.1 percent for the month, snapping three consecutive months of gains and following a decline of -0.4 percent in 2013. The decline was led by Emerging Markets strategies, with HFRI Emerging Markets Index declining -2.6 percent, the first monthly decline since August. Quantitative Macro strategies also declined, with HFRI Macro: Systematic Diversified/CTA Index posting a decline of -1.8 percent. Mixed performance in high frequency Macro strategies offset losses in both quant CTA and fundamental Macro, with HFRI Macro: Active Trading Index posting a narrow gain of +0.01 percent, the fifth consecutive monthly gain, while HFRI Macro: Discretionary Thematic Index posted a narrow decline of -0.1.

Fixed Income-based Relative Value Arbitrage strategies posted gains in January as volatility increased and bond yields declined, with HFRI Relative Value Arbitrage Index gaining +0.5 percent. RVA gains were again led by Asset Backed, Corporate and Convertible fixed income strategies, as these benefitted from low net exposure, falling yields and tactical portfolio adjustment intra-month, with each respective HFRI strategy index gaining +1.2 percent for the month. Highlighting strong performance over past 2 years, the January gain for HFRI Asset Backed was the 25th in past 26 months.

HFRI Event Driven Index declined -0.4 percent January, with mixed performance across ED sub-strategies. Credit Arbitrage and Distressed strategies posted gains for the month, with HFRI Distressed Index gaining +0.02 percent. Following a gain of +16.0 percent in 2013, HFRI ED: Activist Index declined -0.7 percent for January. HFRI Equity Hedge posted a decline of -0.7 percent for January, following an industry leading gain of +14.3 percent in 2013. EH declines were led by HFRI Energy/Basic Materials Index which declined -2.1 percent, while Fundamental Value strategies declined by -1.3 percent. Offsetting these declines, HFRI EH: Technology/Healthcare Index gained +1.9 percent for the month, following a gain of + 22.5 percent in 2013, while HFRI EH: Equity Market Neutral Index rose +0.7 percent, the fifth consecutive advance for the Index.

"Risk and volatility quickly returned to complacent global financial markets to begin 2014, contributing to and highlighting significant strategic, intra-strategy and exposure-specific categorical performance disparities and correlation deviations," stated Kenneth J. Heinz, President of HFR. "While beta-oriented Emerging Markets, Equity Hedge and quant CTA strategies led declines, fundamentally-based RVA, Technology and quantitative Equity Market Neutral posted gains.

Hedge fund managers have quickly adjusted and adapted to more volatile market conditions in early 2014, providing powerful diversification to beta-driven gains of 2013. Managers are actively positioning for additional volatility in coming months and maintaining flexible, tactical portfolio exposures to monetize opportunities created by the volatility."

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