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Index Flash Update - 10 March 2015

Hedge funds see second month of consecutive gains, up 1.59%

Hedge funds extended their gains in the second month of 2015, with the Eurekahedge Hedge Fund Index up 1.59%1 in February, trailing the MSCI World Index2 which ended the month with a strong finish, gaining 5.47%. All regional and strategic mandates ended the month in positive territory with managers focused on developed markets posting the strongest returns.

Key takeaways for the month of February 2015:

  • Investor allocation activity saw an uptick in February as hedge funds recorded inflows of US$6.8 billion during the month.
  • Distressed debt funds delivered the best performance among all strategic mandates, up 3.03% in February as their bets on distressed oil and gas producers paid off.
  • India focused managers were down 0.51% during the month - their first month of negative returns after a 12 month winning streak.
  • On a year-to-date basis, CTA/managed futures strategies lead the strategy return map with gains of 3.98%, and have recorded net asset inflows of US$4 billion. This comes after investors redeemed US$16 billion from the strategy in 2014 alone.
  • Eastern Europe and Russia mandated hedge funds were the top performers during the month with gains of 12.49%, snapping a seven month losing streak.
Index of the Month Feb
2015*
2015 Returns 2014 Returns
Eurekahedge Eastern Europe & Russia Hedge Fund Index 12.49 9.43 -25.07

Main Indices

Main Eurekahedge Indices Feb
2015*
2015 Returns 2014 Returns
Eurekahedge Hedge Fund Index 1.59 2.41 4.42
Eurekahedge Fund of Funds Index 1.32 1.84 3.45
Eurekahedge Long-only Absolute Return Fund 3.36 3.80 3.26
Eurekahedge Islamic Fund Index 1.26 3.21 2.63

Regional Indices

Eurekahedge Regional Indices Feb
2015*
2015 Returns 2014 Returns
Eurekahedge North American Hedge Fund Index 2.13 1.76 5.58
Eurekahedge European Hedge Fund Index 2.39 3.56 0.68
Eurekahedge Eastern Europe & Russia Hedge Fund Index 12.49 9.43 -25.07
Eurekahedge Japan Hedge Fund Index 1.27 0.28 5.23
Eurekahedge Emerging Markets Hedge Fund Index 1.98 1.85 3.49
Eurekahedge Asia ex Japan Hedge Fund Index 1.40 2.55 9.48
Eurekahedge Latin American Hedge Fund Index 1.59 0.01 2.46

Global equity markets rose in unison during February with a return of investor risk appetite as the market downplayed fears of contagion from a possible ‘Grexit’, which was further supported by accommodative monetary policies from central banks around the world. Even as the Federal Reserve comes under increasing pressure to raise interest rates with a strengthening US economy, it appears content to adopt a ‘wait and see’ approach of preferring to raise rates too late rather than too early, which helped to send US equity markets into record territory once again. Meanwhile optimism over the European Central Bank’s massive quantitative easing with its asset purchase program of 60 billion Euros a month fuelled a further rally in European equities and bonds. Most German (and some European members) sovereign bond yields are now in negative territory, which could have implications for the pension liabilities which rely on positive rates to meet their obligations.

During the month of February, Eastern Europe and Russia hedge funds saw their first gain in eight months, with the Eurekahedge Eastern Europe & Russia Hedge Fund Index soaring 12.49%, though falling behind the Russian RTS stock index which rocketed 21.60%. The heavily oil-dependent Russian stock index and the rouble, which were previously in a freefall, reversed sharply upwards during the month as the Russian-Ukraine situation showed signs of improvement while oil prices appear to have bottomed out. European managers came in second place, gaining 2.39% in February and 3.56% year-to-date, which outstripped returns for the entire year of 2014, buoyed by strong underlying markets as the MSCI Europe Index3 gained 6.09% during the month. Emerging market and Latin American managers were also up 1.98% and 1.59% respectively, benefitting from the strong gains in commodities and risk assets as a whole – the MSCI Latin America Index4 gained 7.10%. Similarly, mangers investing with a Japan mandate realised gains of 1.27% in February, underperforming the benchmark Nikkei 225 which rose 6.38% on further yen weakness and news that a big Japanese pension fund manager would increase its domestic equity allocation.

Strategy Indices

Volatility faded away amid increasing investor confidence as stock markets continued their upwards march in February, with the CBOE VIX Index falling from 20.97 to 13.34 as equities closed the month on multi-year highs. Distressed debt and event driven fund managers rose back into prominence after being at the bottom of the table in January, posting the largest returns out of all strategic mandates at 3.03% and 2.73% respectively, attributing gains to their long positions in the high yield bonds sector as the BofA Merrill Lynch High Yield Index5 gained 2.33%. Managers had jumped on the opportunity to invest in the debt of distressed oil and gas producers following the precipitous drop in oil prices and the modest recovery in oil during the month had significantly changed the outlook of these companies for the better. Long/short equity funds also performed well, reporting gains of 2.47% as stock markets around the world responded well to aggressive monetary easing by their respective central banks. On the other hand, CTA/managed futures strategies gained the least during the month; rising only 0.29%, a far cry from their strong performance in January. There was a severe reaction against established trends in the energy and US bond markets early during the month, which resulted in losses for many trend following managers. Despite this setback, the bull market in equities and the US dollar remains intact, which were sufficient to cover their losses during this period.

Eurekahedge Strategy Indices Feb
2015*
2015 Returns 2014 Returns
Eurekahedge Arbitrage Hedge Fund Index 1.65 1.68 3.13
Eurekahedge CTA/Managed Futures Hedge Fund Index 0.29 3.98 9.28
Eurekahedge Distressed Debt Hedge Fund Index 3.03 1.74 1.18
Eurekahedge Event Driven Hedge Fund Index 2.73 1.73 1.93
Eurekahedge Fixed Income Hedge Fund Index 1.32 1.61 3.13
Eurekahedge Long Short Equities Hedge Fund Index 2.47 2.50 3.39
Eurekahedge Macro Hedge Fund Index 0.75 2.92 4.03
Eurekahedge Multi-Strategy Hedge Fund Index 1.55 2.13 4.25
Eurekahedge Relative Value Hedge Fund Index 1.67 1.24 2.45
Eurekahedge Global Hedge Fund Indices by Fund Size Feb
2015*
2015 Returns 2014 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) 1.58 2.41 4.10
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 1.82 2.56 4.69
Eurekahedge Large Hedge Fund Index (> US$500m) 1.09 2.07 5.60
Eurekahedge Billion Dollar Hedge Fund Index 0.69 1.72 4.96
Mizuho-Eurekahedge Indices Feb
2015*
2015 Returns 2014 Returns
Mizuho-Eurekahedge Index - USD 0.92 0.88 1.19
Mizuho-Eurekahedge TOP100 Index - USD 0.59 1.60 2.30
Mizuho-Eurekahedge TOP300 Index - USD 0.71 0.97 1.76
Asia-Eurekahedge Indices Feb
2015*
2015 Returns 2014 Returns
Eurekahedge Greater China Hedge Fund Index 1.33 1.27 7.84
Eurekahedge India Hedge Fund Index -0.51 4.76 38.83

* Based on 33.04% of funds which have reported February 2015 returns as at 10 March 2015


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