Index Flash Update - 12 December 2017







Hedge funds on track to post 12 consecutive months of gains in an annual year for the first time on record since 1999

Hedge funds were up 0.24%1 during the month of November, with 2017 year-to-date returns coming in at 7.19%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local), gained 1.16% in November with its 2017 year-to-date returns coming in at 16.17%. Roughly 76% of underlying constituent funds for the Eurekahedge Hedge Fund Index were in positive territory this month, with majority of them being long/short equities mandated. Equity markets continued to perform well this month with strength led by US and emerging Asian markets. Encouraging macroeconomic data from US and Japan buoyed economic recovery sentiments with growth in manufacturing activity adding to much optimism. On the other hand, data coming out of the Europe was rather lukewarm subdued inflation figures, the failure in German coalition talks and a strengthening euro. Meanwhile early estimates put hedge fund returns in positive territory at 0.36% for the month of December. Barring any major event materialising for the rest of the month this should see the global hedge fund industry end 2017 with gains of 7.81% - 322 basis points higher in comparison to annual gains for 2016.

Returns were mixed across the board of regional mandates with Asia ex-Japan hedge fund managers delivering the best returns, up 1.46% over the month, followed by Japan and North American mandated hedge funds with gains of 0.92% and 0.76% respectively. On the other hand, Latin American mandated hedge funds posted the steepest decline in November, down 1.38% followed by European mandated hedge funds with losses of 0.44%. On a year-to-date basis, Asia ex-Japan hedge fund managers led the table gained 19.84% followed by their emerging markets and Japanese counterparts with returns of 15.16% and 12.09% respectively.

Below are the key highlights for the month of November 2017
  • Hedge funds are on track to post their strongest returns since 2013 with gains of 0.24% in November and estimated returns of 0.36% for the month of December. Barring any major event materialsing for the rest of the month, this should see the global hedge fund industry ending 2017 with gains of 7.81% - 322 basis points higher in comparison to annual gains for 2016.

  • Total hedge fund industry AUM has grown by almost 7% in 2017 following a contraction in 2016 on the back of strong performance-based gains and a renewed interest from investors. Industry assets have grown by US$160 billion in 2017 in contrast to a US$ 20 billion decline last year.

  • Fund closures continued to outpace launch activity for the second consecutive year with 490 funds liquidating in 2017 whilst the number of startups for the year stands at 451. While Asia and North America have seen a net growth in fund population, Europe has seen a decline for the third year running.

  • The top 5 best performing hedge fund strategies for 2017 remain as: equity long-bias, equity long/short, multi-strategy, short volatility and event driven with gains of 15.24%, 11.03%, 8.93%, 8.74% and 7.47% respectively.

  • On a year-to-date basis, Japanese hedge fund managers led across developed market mandates and were up 12.09%, followed by their European and North American counterparts gaining 6.60% and 5.55% respectively.

  • Emerging market mandates continued to outshine their developed market peers in 2017 year-to-date, with Greater China, India and Asia ex-Japan hedge funds up 27.83%, 27.64% and 19.81% respectively. Latin America and Eastern Europe mandated funds were also up 12.14% and 10.11% for the year.

  • Average performance and management fees charged by new hedge funds launching in 2017 stand at 17.11% and 1.26% respectively, comparing with figures of 16.52% and 1.41% for 2016.

Index of the Month Nov
2017 Returns 2016 Returns
CBOE Eurekahedge Short Volatility Hedge Fund Index 0.67 8.74 5.09

Main Indices

Main Eurekahedge Indices Nov
2017 Returns 2016 Returns
Eurekahedge Hedge Fund Index 0.24 7.19 4.59
Eurekahedge Fund of Funds Index -0.06 6.17 0.03
Eurekahedge Long-only Absolute Return Fund 1.05 19.24 7.57
Eurekahedge Islamic Fund Index -0.28 5.36 4.14

Regional Indices

Eurekahedge Regional Indices Nov
2017 Returns 2016 Returns
Eurekahedge North American Hedge Fund Index 0.76 5.55 7.84
Eurekahedge European Hedge Fund Index -0.44 6.60 0.22
Eurekahedge Eastern Europe & Russia Hedge Fund Index 0.11 10.11 23.08
Eurekahedge Japan Hedge Fund Index 0.92 12.09 1.72
Eurekahedge Emerging Markets Hedge Fund Index 0.11 15.16 7.06
Eurekahedge Asia ex Japan Hedge Fund Index 1.46 19.81 -0.38
Eurekahedge Latin American Hedge Fund Index -1.38 12.14 18.07

Performance was a mixed bag across regional mandates with Asian hedge funds leading this month. Asia ex-Japan hedge fund managers posted the best gains, up 1.46%, their eleventh consecutive month of gains which brings their year-to-date returns at 19.81%. Underlying Greater China investing mandates were up 1.25% in November, bringing their year-to-date returns to 27.83% with strong gains accruing from exposure to Chinese technology stocks. Japan mandated hedge funds were also up 0.92%, as Japanese equity markets ended the month in positive territory with the Nikkei 225 Index up 3.24% despite strong JPY/USD during the month.

Among developed market mandated funds, the Eurekahedge North America Hedge Fund Index posted gains of 0.76% as underlying markets continued their uptrend with the DJIA, S&P 500 and NASDAQ up 3.83%, 2.90% and 2.17% respectively. Positive progress over the US tax reform boosted US equities to all time high which helped prop up manager’s long book. Over in Europe, political uncertainty remained as the formation of a new coalition government in Germany failed while uncertainty over Brexit talks boosted concerns over investors’ confidence in the region. Hedge funds investing in the region posted losses of 0.44% with the MSCI AC Europe Local Index declining 1.80% during the month. This along with the correction in EUR/USD put some pressure on markets, with underlying European equity markets posting losses and volatility edging up a notch higher. On the other hand, political uncertainty plaguing the Latin American region led to a considerable weakening of the region’s equity markets with the Ibovespa Index down 3.15% for the month. Mexico’s equity markets also slipped 3.21% over the same period. Eurekahedge Latin American Hedge Funds Index declined 1.38% in November. Given Trump’s protectionist rhetoric, Mexican markets will remain vulnerable to the outcome of NAFTA negotiations in 2018. However, in the event that Trump secures a ‘better deal’ for the US within the confines of the NAFTA agreement, there could be substantial upside to be had in the underlying markets.

On a year-to-date basis, Asia ex-Japan hedge funds maintained their lead, up 19.81% over the past eleven months, followed by emerging markets and Japanese managers gaining 15.16% and 12.09% respectively. Latin American hedge fund managers, sub-group of the broader Emerging Markets Hedge Fund Index, were up 12.14% followed by European and North American managers with returns of 6.60% and 5.55% respectively.


Strategy Indices

Performance was mixed across strategic mandates, with relative value hedge funds posting the best performance in November, gaining 0.64% mostly supported by underlying short volatility hedge funds, as represented by the 0.67% gain of the CBOE Eurekahedge Short Volatility Hedge Fund Index. Long/short equities hedge funds were up 0.63% sustained by North American and Asian long/short equities hedge fund managers who generated 1.40% and 1.31% respectively. Meanwhile, European long/short equities managers were in the red down 0.47% throughout the month. Much attention was focused on the progress of the tax reform in the US which took a step closer to approval with long positions to US equities among profitable moves. Macro hedge funds also posted good returns during the month, up 0.27%, followed by multi-strategy hedge fund managers who were up 0.05% over the same period.

Meanwhile event driven hedge funds posted the steepest decline among strategic mandates as they were down 0.59% over the month. Following them were distressed debt hedge fund managers with losses of 0.53%, the underlying US high yield market was down 0.24% over the month. Managers reported losses on long positions in UK contracts as the UK gilt was in red during the month in responding to BOE rate hike implementation. Arbitrage hedge funds were also in negative territory this month, down 0.16% followed by fixed income hedge funds with losses of 0.10% over the same period. CTA/managed futures managers were down a modest of 0.03% during the month, with underlying FX-focused hedge funds as represented by the Eurekahedge FX Hedge Fund Index declining 0.73% as managers were caught in the USD reversal late into the month, giving back the gains made from shorting the dollar. Among short term programs, going into long AUD/USD, EUR/USD and EUR/JPY towards month-end did cushion the impact of the reversal to some extent, but this was not sufficient to recoup losses suffered during the reversal. Losses were seen from long positions in USD/JPY and GBP/USD as the greenback weakened during the month. In the UK, sterling strengthened against dollar as the BOE increased interest rates for the first time since 2007 given upbeat inflation numbers, leading to a 2.04% loss in the FTSE. Commodity hedge funds, also a subset of the broad CTA index were down 0.47% over the same period. The sell-off in industrial metals was a performance detractor for managers with the S&P GSCI Industrial Metals Index declining 3.15% during the month over concerns of a weaker demand from China. The weakening of the dollar towards the end of the month also affected manager’s position into precious metals, with short positions into gold detracting gains for some managers as anticipation on the Fed rate hike builds up toward the end of the year. However, some CTA/managed futures managers were able to reap gains with exposures in softs and agriculture which gained 2.90% and 0.52% during the month. Towards the month end, the OPEC supply cut extension announcement was another development which saw oil trading closer to the $60 mark, leading to an oil rally on the final day of November.

Looking at 2017 year-to-date performance, long/short equities hedge funds led the table, gaining 11.03% as global equities markets rallied strongly as the year-end comes close. Multi-strategy and event driven hedge funds were also up year-to-date, gaining 8.93% and 7.47% respectively over the same period, as the current market uncertainty presents ample opportunities for managers to take advantage of price dislocations in underlying assets.


Table 1: Index Flash Strategy Return Map

Eurekahedge Strategy Indices Nov
2017 Returns 2016 Returns
Eurekahedge Arbitrage Hedge Fund Index -0.16 4.06 4.90
Eurekahedge CTA/Managed Futures Hedge Fund Index -0.03 1.45 1.79
Eurekahedge Distressed Debt Hedge Fund Index -0.53 4.57 13.15
Eurekahedge Event Driven Hedge Fund Index -0.59 7.47 10.36
Eurekahedge Fixed Income Hedge Fund Index -0.10 6.22 6.60
Eurekahedge Long Short Equities Hedge Fund Index 0.63 11.03 3.76
Eurekahedge Macro Hedge Fund Index 0.27 3.12 2.98
Eurekahedge Multi-Strategy Hedge Fund Index 0.05 8.93 5.15
Eurekahedge Relative Value Hedge Fund Index 0.64 5.42 7.28
CBOE Eurekahedge Long Volatility Hedge Fund Index -1.13 -10.80 -2.82
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index 0.27 3.11 7.44
CBOE Eurekahedge Short Volatility Hedge Fund Index 0.67 8.74 5.09
CBOE Eurekahedge Tail Risk Hedge Fund Index -3.87 -14.78 -11.81
Eurekahedge Equity Long Bias Hedge Fund Index 0.74 15.24 5.31
Eurekahedge Equity Market Neutral Hedge Fund 0.24 3.77 -0.41
Eurekahedge Equity Short Bias Hedge Fund Index -1.97 -17.37 -7.35
Eurekahedge Trend Following Index 0.72 0.38 -1.01
Eurekahedge FX Hedge Fund Index -0.73 0.15 0.91
Eurekahedge Commodity Hedge Fund Index -0.47 -0.94 6.98
Eurekahedge Global Hedge Fund Indices by Fund Size Nov
2017 Returns 2016 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) 0.29 7.27 4.97
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 0.10 7.54 4.30
Eurekahedge Large Hedge Fund Index (> US$500m) 0.15 5.40 2.74
Eurekahedge Billion Dollar Hedge Fund Index -0.06 4.51 2.47
Mizuho-Eurekahedge Indices Nov
2017 Returns 2016 Returns
Mizuho-Eurekahedge Index - USD 0.78 7.83 0.72
Mizuho-Eurekahedge TOP100 Index - USD 0.65 6.04 0.25
Mizuho-Eurekahedge TOP300 Index - USD 0.71 7.03 0.24
Asia-Eurekahedge Indices Nov
2017 Returns 2016 Returns
Eurekahedge Greater China Hedge Fund Index 1.25 27.83 -4.47
Eurekahedge India Hedge Fund Index 2.76 27.64 3.85

* Based on 42.07% of funds which have reported November 2017 returns as at 12 December 2017

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