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Index Flash Update - 10 February 2016

Hedge funds off to a rough start in 2016, down 0.91% in January

January puts a spotlight on Asia as developments in East Asian economies along with a tumbling oil price took centre stage and sent ripples throughout Asia and beyond with the MSCI World Index1 declining 5.71% during the month. Hedge funds also reflected the sluggish situation and were off to a weak start to the year with the Eurekahedge Hedge Fund Index down 0.91%2 in January as volatility in the equity markets dominated trading throughout the month. Concerns over the health of the Chinese economy also added to the bleak market outlook during the month; however a cold spell in the US took some heat off China following a brief recovery in oil prices. Meanwhile the BOJ caught the markets by surprise in late January by announcing negative interest rates - this followed a dismal start to the year for Japanese equities with the Nikkei 225 declining 7.96% during the month. The overall uncertainty in the markets led to a flight to safety which saw capital going into traditional safe havens – the Bund and the JGB saw record low yields as a result of the confluence of macroeconomic developments.

Key takeaways for the month of January 2016:

  • Hedge funds were down 0.91% during the month though outperforming underlying markets as the MSCI World Index3 declined 5.71% over the same period.
  • All regional mandates posted negative returns during the month, with Asia-focused hedge funds posting the steepest decline - Asia ex Japan hedge funds were down 3.30% followed by Japan hedge funds which were down 2.44%.
  • Greater China investing hedge funds posted their first month of losses since August 2015 and were down 5.98% in January with its long/short equity heavyweight declining 6.24% as Chinese equity markets came under pressure during the month. The CSI 300 declined 21.04% over the same period.
  • Long short equities hedge funds posted losses during the month - down 2.80%. Across regional mandates, Asian long/short equities hedge funds performed the worst, down 3.24% over the same period.
  • Event driven funds have posted the worst monthly return among all hedge fund strategic mandates, down 3.45% - their worst performance on record since 2011. Meanwhile CTA/managed futures managers have posted the strongest gains during the month, up 2.50% helped by short positions in Asia equity futures and energy.
  • The CBOE-Eurekahedge Tail Risk Hedge Fund Index posted the best gains among the suite of CBOE-Eurekahedge Volatility Indices – up 3.53% as stock market volatility dominated trading during the month.
Index of the Month Jan
2016*
2015 Returns 2014 Returns
CBOE Eurekahedge Long Volatility Hedge Fund Index 2.59 -1.06 1.58

Main Indices

Main Eurekahedge Indices Jan
2016*
2015 Returns 2014 Returns
Eurekahedge Hedge Fund Index -0.91 1.42 4.68
Eurekahedge Fund of Funds Index -1.96 0.42 3.55
Eurekahedge Long-only Absolute Return Fund -5.93 -2.12 3.76
Eurekahedge Islamic Fund Index -3.48 -1.49 2.69

Regional Indices

Eurekahedge Regional Indices Jan
2016*
2015 Returns 2014 Returns
Eurekahedge North American Hedge Fund Index -1.70 -0.70 5.60
Eurekahedge European Hedge Fund Index -1.87 4.73 0.95
Eurekahedge Eastern Europe & Russia Hedge Fund Index -2.12 1.81 -22.04
Eurekahedge Japan Hedge Fund Index -2.44 6.52 5.76
Eurekahedge Emerging Markets Hedge Fund Index -2.37 3.38 3.72
Eurekahedge Asia ex Japan Hedge Fund Index -3.30 7.95 9.04
Eurekahedge Latin American Hedge Fund Index -1.10 0.60 2.19

All regional mandates were down during the month of January with Asia ex Japan mandated funds seeing the biggest decline – down 3.30% as underlying Chinese equity markets declined at the start of the year as a result of a sell-off triggered by concerns over the Chinese economy. Greater China hedge fund managers registered losses of 5.98% while the region’s long/short equity hedge funds saw losses of 6.24% during the month as Chinese equity markets registered broad declines during the month. Japanese managers also posted losses and were down 2.44% during the month. The CSI 300 and the Hang Seng Indices declined 10.18% and 21.04% respectively during the month. North American and European fund managers were also stung by the global risk-on mode with losses of 1.70% and 1.87% respectively as 2016 got off to a rough start.

Overall for 2015, Asia ex-Japan, dedicated Japan and European mandates performed the best delivering gains of 8.35%, 6.21% and 5.06% respectively. Meanwhile Latin America mandated funds struggled in the red, down 0.39% for the year while North America dedicated strategies are barely above water, delivering a flat 0.03% in a disappointing year for US equities.

Strategy Indices

All strategic mandates with the exception of CTA/managed futures hedge funds were in negative territory during the month. The Eurekahedge CTA/Managed Futures Hedge Fund Index was the best performer, up 2.50% during the month, as hedge funds with short exposure to Asian equity markets registered gains during the month. CTA/managed futures hedge fund managers who were cautious of the weak Chinese fundamentals also registered gains through short positions in the Hang Seng and offshore Chinese equity markets. Hedge funds with exposure into the JGB and the Bund also registered gains as investor flight to safety along with expectations of further central bank easing sent yields to record lows. On the FX front, diverging central bank policies led to a strengthening of the greenback, furthermore the oil situation led to the USD/CAD being a rather profitable pair as so with the AUD and the GBP.

On the other hand, event driven managers posted the steepest loss this month, down 3.45%, followed by long/short equities managers with losses of 2.80% as global equity markets plummeted across the board in January. Among regional mandates within this strategy, Asian long/short equity managers posted losses of 3.24%, followed by North American long/short equity managers – down 2.92%. Greater China long/short equities hedge funds, a heavy-weight in the index were down 6.24%, posting the worst performance across Asian single-country long/short equity mandates during the month.

Eurekahedge Strategy Indices Jan
2016*
2015 Returns 2014 Returns
Eurekahedge Arbitrage Hedge Fund Index -0.35 4.43 2.74
Eurekahedge CTA/Managed Futures Hedge Fund Index 2.50 -1.10 9.38
Eurekahedge Distressed Debt Hedge Fund Index -2.26 -4.87 0.99
Eurekahedge Event Driven Hedge Fund Index -3.45 -1.93 2.29
Eurekahedge Fixed Income Hedge Fund Index -0.97 0.87 3.67
Eurekahedge Long Short Equities Hedge Fund Index -2.80 2.92 3.55
Eurekahedge Macro Hedge Fund Index -0.37 1.64 4.72
Eurekahedge Multi-Strategy Hedge Fund Index -1.11 2.16 4.80
Eurekahedge Relative Value Hedge Fund Index -2.34 1.64 3.76
CBOE Eurekahedge Long Volatility Hedge Fund Index 2.59 -1.06 1.58
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index -0.33 4.50 -0.36
CBOE Eurekahedge Short Volatility Hedge Fund Index -1.03 0.98 4.47
CBOE Eurekahedge Tail Risk Hedge Fund Index 3.53 -9.69 -3.22
Eurekahedge Global Hedge Fund Indices by Fund Size Jan
2016*
2015 Returns 2014 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) -0.70 1.03 4.45
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) -1.19 2.62 4.68
Eurekahedge Large Hedge Fund Index (> US$500m) -0.32 2.25 5.45
Eurekahedge Billion Dollar Hedge Fund Index -0.13 2.03 5.03
Mizuho-Eurekahedge Indices Jan
2016*
2015 Returns 2014 Returns
Mizuho-Eurekahedge Index - USD -0.62 -0.64 1.18
Mizuho-Eurekahedge TOP100 Index - USD -0.19 0.85 2.32
Mizuho-Eurekahedge TOP300 Index - USD -0.37 -0.01 1.77
Asia-Eurekahedge Indices Jan
2016*
2015 Returns 2014 Returns
Eurekahedge Greater China Hedge Fund Index -5.98 9.91 7.66
Eurekahedge India Hedge Fund Index -2.50 5.30 39.10

* Based on 38.12% of funds which have reported January 2016 returns as at 10 February 2016


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