Index Flash Update - 10 August 2016

Hedge funds up 1.52%, posting fifth consecutive month of gains - 2.55% year-to-date

Hedge funds were up during the month of July, gaining 1.52%1 while underlying markets as represented by the MSCI World Index (Local) were up 4.18%. Roughly 73% of the underlying constituent hedge funds for the Eurekahedge Hedge Fund Index were in positive territory this month thanks to a broad-based global equity market rally and an improving investor risk appetite post-Brexit. Latin American managers led performance among regional mandates this month, and were up 4.30% while relative value managers topped the table across strategies, gaining 2.92% over the same period.

As of 2016 year-to-date, hedge funds gained 2.55% with over half of managers posting positive year-to-date returns. Roughly 12% of hedge fund managers have posted year-to-date returns in excess of 10% over the past seven months, down from 16% of funds over the same period last year. One-third of these funds posting double digit gains are long/short equity mandated while another quarter of them are CTA/managed futures mandated hedge funds.

Key takeaways for the month of July 2016:
  • Hedge funds posted their fifth consecutive month of gains, up 1.52% and 2.55% year-to-date. Long only absolute return strategies are up 6.17% year-to-date, ahead of underlying markets as represented by the MSCI World Index which have gained 2.69%.
  • Funds of hedge funds are down 1.02% as of 2016 year-to-date, following small gains of 0.41% and 3.53% in AY 2015 and 2014 respectively. Investors have redeemed US$17.4 billion from funds of hedge funds as of 2016 year-to-date, following US$52.7 billion of redemptions in the previous year.
  • Among developed mandates, North American hedge fund managers were up 1.78%, followed by European and Japanese managers who were up 1.41% and 1.00% respectively. On a year-to-date basis, North American hedge fund managers gained 4.00% while their European and Japanese counterparts were in the red with losses of 1.81% and 4.26% respectively.
  • The Eurekahedge Relative Value Hedge Fund Index posted the best returns among strategic mandates in July and was up 2.92% during the month as exposure into some energy and consumer names boosted returns for relative value managers.  Managers also posted impressive year-to-date gains, up 5.31% while those trading volatility also posted impressive gains of 5.43% year-to-date.
  • Long/short equities hedge funds were up 2.32% in July with equity long bias hedge funds posting an impressive 3.75% increase, boosted by the broad-based rally in the global equity markets during the month. Latin American long/short equities hedge funds posted the best year-to-date gains, up 19.45% while Japanese long/short equities hedge funds fared the worst, down 3.82% over the year.
  • Asia ex-Japan hedge fund managers gained 2.78% during the month and 0.47% year-to-date. Underlying Greater China hedge funds grew by 1.44% in July but lost 4.85% year-to-date, though outperforming the CSI 300 Index which fell 14.13% over the same period.
Index of the Month Jul
2016 Returns 2015 Returns
Eurekahedge Equity Long Bias Hedge Fund Index 3.75 0.95 -0.32

Main Indices

Main Eurekahedge Indices Jul
2016 Returns 2015 Returns
Eurekahedge Hedge Fund Index 1.52 2.55 1.63
Eurekahedge Fund of Funds Index 1.48 -1.02 0.41
Eurekahedge Long-only Absolute Return Fund 3.94 6.17 -1.80
Eurekahedge Islamic Fund Index 1.99 2.16 -1.85

Regional Indices

Eurekahedge Regional Indices Jul
2016 Returns 2015 Returns
Eurekahedge North American Hedge Fund Index 1.78 4.00 -0.18
Eurekahedge European Hedge Fund Index 1.41 -1.81 4.86
Eurekahedge Eastern Europe & Russia Hedge Fund Index -1.72 8.92 1.87
Eurekahedge Japan Hedge Fund Index 1.00 -4.26 6.81
Eurekahedge Emerging Markets Hedge Fund Index 2.57 5.57 3.18
Eurekahedge Asia ex Japan Hedge Fund Index 2.78 0.47 7.72
Eurekahedge Latin American Hedge Fund Index 4.30 15.67 0.58

Emerging markets focused hedge funds led the tables in July, up 2.57%, with underlying Latin American hedge funds gaining 4.30% during the month. Brazil’s Ibovespa increased by 11.22% in July, boosting returns for Brazil focused equity long bias hedge funds during the month. Over in Asia, the broad-based rally has also propped up the performance of Asia ex-Japan managers, gaining 2.78%, with underlying India and Greater China mandated hedge funds ended the month up 4.05% and 1.44% respectively. Developed market mandated hedge funds were also up during the month with North American mandates growing 1.78% followed by European and Japanese managers who inched up 1.41% and 1.00% respectively. The global equity market rally was indeed a main theme during the month, supporting gains for managers in both emerging and developed markets.

On a year-to-date basis, emerging market focused hedge funds feature strongly with Latin American managers gaining 15.67% followed by Eastern Europe & Russia managers with year-to-date gains of 8.92%. On the flip side, Japan dedicated managers have been the worst performers for the year with the Eurekahedge Japan Hedge Fund Index down 4.26% year-to-date. Brexit and the flight to safe haven assets have resulted in the Yen gaining considerable strength, affecting the Bank of Japan’s policy maneuverability. Year-to-date performance for European managers were also in the red, down 1.81% with longer term concerns on Brexit as well as the financial ecosystem of the Eurozone likely to add to volatility in the European region in the coming months.

Strategy Indices

All strategic mandates were in positive territory during the month with relative value managers leading the table, gaining 2.92% as exposure into some energy and consumer discretionary names boosted returns for managers. The ongoing uncertainty over the past seven months has also resulted in asset price dislocations, favouring investment strategies pursued by relative value managers. The upward momentum in the global stock markets boosted the performance of long/short equity managers this month with the Eurekahedge Long Short Equities Hedge Fund Index gaining 2.32%. Volatile market conditions gradually eased post-Brexit shock with the CBOE VIX falling towards month’s end while investor risk appetite was also somewhat restored, leading most regional equity markets upwards. Managers with exposure into North American and Latin American equities posted strong gains during the month with the US S&P 500 and Brazil Ibovespa up 3.56% and 11.22% respectively. Unsurprisingly, equity long bias hedge funds also posted impressive gains, up 3.75% with sector exposure into consumer discretionary, energy, internet and technology names among top positions. Equity market neutral hedge funds were also positive during the month with 0.92% gains. Distressed debt and event driven hedge fund managers also grew by 2.20% and 2.18% respectively in July as improving risk appetite in July led to gains in the leveraged loans2 and high yield3 credit space.

Following steep losses of 4.43% in 2015, distressed debt investing hedge funds lead the tables in 2016 with gains of 6.56% as commodity prices have recovered and positions acquired at steep discounts last year have started to post gains. Relative value managers also reported positive year-to-date gains, up 5.31%, as the current uncertainty and a relatively active M&A scene have given managers ample opportunities to take advantage of price dislocations in underlying assets. Event driven and CTA/managed futures hedge funds also posted strong year-to-date figures, up 5.00% and 4.22% respectively.

Eurekahedge Strategy Indices Jul
2016 Returns 2015 Returns
Eurekahedge Arbitrage Hedge Fund Index 0.82 3.18 5.03
Eurekahedge CTA/Managed Futures Hedge Fund Index 0.54 4.22 -0.52
Eurekahedge Distressed Debt Hedge Fund Index 2.20 6.56 -4.43
Eurekahedge Event Driven Hedge Fund Index 2.18 5.00 -1.46
Eurekahedge Fixed Income Hedge Fund Index 1.12 3.45 0.98
Eurekahedge Long Short Equities Hedge Fund Index 2.32 0.87 3.09
Eurekahedge Macro Hedge Fund Index 0.66 1.54 1.58
Eurekahedge Multi-Strategy Hedge Fund Index 1.55 3.43 2.22
Eurekahedge Relative Value Hedge Fund Index 2.92 5.31 1.32
CBOE Eurekahedge Long Volatility Hedge Fund Index 1.19 0.84 -1.07
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index 0.83 5.43 4.47
CBOE Eurekahedge Short Volatility Hedge Fund Index 0.50 -0.46 1.09
CBOE Eurekahedge Tail Risk Hedge Fund Index -2.81 -9.90 -9.51
Eurekahedge Equity Long Bias Hedge Fund Index 3.75 0.95 -0.32
Eurekahedge Equity Market Neutral Hedge Fund 0.92 -0.97 7.47
Eurekahedge Equity Short Bias Hedge Fund Index -4.03 -5.65 5.09
Eurekahedge Trend Following Index 1.45 5.49 -2.18
Eurekahedge Global Hedge Fund Indices by Fund Size Jul
2016 Returns 2015 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) 1.56 2.92 1.21
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 1.77 2.23 2.80
Eurekahedge Large Hedge Fund Index (> US$500m) 1.07 1.15 2.25
Eurekahedge Billion Dollar Hedge Fund Index 0.90 0.98 1.71
Mizuho-Eurekahedge Indices Jul
2016 Returns 2015 Returns
Mizuho-Eurekahedge Index - USD 1.02 0.94 -0.69
Mizuho-Eurekahedge TOP100 Index - USD 0.76 0.28 0.85
Mizuho-Eurekahedge TOP300 Index - USD 0.82 0.43 0.00
Asia-Eurekahedge Indices Jul
2016 Returns 2015 Returns
Eurekahedge Greater China Hedge Fund Index 1.44 -4.85 10.24
Eurekahedge India Hedge Fund Index 4.05 6.04 4.28

* Based on 42.42% of funds which have reported July 2016 returns as at 10 August 2016

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