The benchmark Eurekahedge Hedge Fund Index in January. Total assets under management increased by US$16.9 billion during the month as the sector witnessed performance-based increase of US$22.1 billion while registering net asset outflows of US$5.3 billion. The total size of the industry now stands at US$2.31 trillion.
The Eurekahedge Hedge Fund Index rallied 2.32% in January, supported by the strength in global equity markets which pushed the MSCI AC World Index 7.36% higher, recovering from the losses it suffered back in December. Cautious tone from the Federal Reserve and positive expectations on the US-China trade talk resulted in strong gains across the global equity and fixed income markets during the month, despite lingering concerns over slowing economic growth. Weaker US dollar and improving trade outlook acted as tailwinds for fund managers with exposure toward Asia and emerging markets in general, resulting in positive returns across geographic mandates throughout the month.
The Eurekahedge Hedge Fund Index kicked off the year with a solid showing, as it gained 2.32% in January, in contrast to how the index declined 4.08% last year, following five consecutive months of losses. Dovish stance exhibited by the Federal Reserve signalled higher level of flexibility in future rate changes, and together with greater optimism over trade talk progresses between the United States and China they supported the global equity market performance throughout the month.
The Eurekahedge Funds of Funds Index ended 2018 down 4.58%, trailing behind the average hedge fund which would have lost 4.08% throughout the year. The persistent underperformance of multi-manager funds in terms of net returns has sparked questions over the value proposition offered by such structure, which was supposed to provide investors access to a wider pool of fund managers, as well as cheaper due diligence costs for smaller investors planning to invest in multiple single manager hedge funds.
Since the onset of the global financial crisis, investors worldwide have grown more cautious in undertaking investments and have increased their demands for underlying investment products and instruments to be monitored by international compliance standards. The Undertakings for Collective Investment in Transferable Securities or ‘UCITS’ was developed to meet this post-crisis demand, as UCITS embodied by strong regulation resulting to a high level of investors protection with certain restrictions such as liquidity of the underlying assets and leverage caps to provide added transparency to investors.
The Islamic finance industry is a niche market predominantly serving the needs of the world’s Muslim population. Products marketed under the umbrella of Islamic finance comply with a different investment philosophy as opposed to traditional investment philosophy which the rest of the world are familiar with. Under a Shariah-compliant framework, transactions which are considered to be unethical under Islamic law are prohibited and instead, fund managers invest in products which are compliant with Islamic guidelines.
Eurekahedge’s UCITS hedge funds infographic sums up the industry as at February 2019. Find out more about UCITS hedge funds assets under management (AUM), asset flows into strategic and regional mandates, strategy returns, fund size and geographic AUM, head office locations and the best and worst performances of the year.
Luxembourg has transposed MiFID II into its national law, albeit five months after the deadline for doing so. In other matters, the Luxembourg supervisory authority, the Commission de Surveillance du Secteur Financier (CSSF) issued two circulars in August: one reshaping the organisational rules for Luxembourg UCITS management companies, self-managed UCITS, authorised AIFMs and internally managed AIFs; the second, providing guidance as to the requirements for Luxembourg depositaries servicing Luxembourg AIFs (other than Part II UCIs marketed to retail investors), as well as SIFs and SICARs that do not qualify as AIFs. These developments are discussed below.
The Situation: The Office of Compliance Inspections and Examinations ("OCIE") of the U.S. Securities and Exchange Commission has released its 2019 Examination Priorities ("Report"). The Result: The Report details key areas where OCIE currently intends to focus its examination resources in 2019. The Report's key areas that should be of particular interest for private fund advisers (e.g., advisers to real estate, hedge, private equity, and venture capital funds) include fees and expenses, conflicts of interest, portfolio management and trading, digital assets, and cybersecurity.
On 13 December 2018, the Finnish Government published a legislative proposal aimed at eliminating problems in tax legislation relating to the establishment of private equity funds in the form of limited partnerships. The taxation of investors in private equity funds operating in a form of a Finnish limited partnership has, in certain respects, been based on established case law and tax practice. The taxation of foreign investors was originally eased through a special provision enacted in 2005 (Income Tax Act section 9(5)). When the special provision applies, an investor, having limited tax liability in Finland and being a limited partner in Finnish PE fund operating in a form of a limited partnership, is taxed for its share of the income of the fund only to the extent the income would be taxable if received directly by that investor.