The benchmark Eurekahedge Hedge Fund Index was up 1.03% in December, while the MSCI World Index was up 2.38% over the month. Total assets under management increased by US$4.62 billion during the month as the sector witnessed performance-based gains of US$12.24 billion while registering net asset outflows of US$7.62 billion. The total size of the industry now stands at US$2.23 trillion.
The Eurekahedge Hedge Fund Index grew 1.03% in December while underlying markets as represented by the MSCI World Index were up 2.38% over the same period. Among regional mandates, North American managers led the table, up 1.22% during the month followed by European managers with 1.07%. Across strategies, event driven hedge funds were in the lead with 1.65% gains followed by macro hedge funds with 1.32%.
Hedge funds gained 1.03% during the month of December, with 2016 returns coming in at 4.48%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 2.38% in December with its 2016 returns coming in at 7.37%. North American equity markets traded higher in December as the Trump-driven reflation theme buoyed markets in a somewhat ‘honeymoon’ period post-election. The S&P 500 Index gained 1.82% during the month, with the DJIA also up 3.34%.
Quantitative hedge fund strategies have received considerable interest from investors over the last decade. The application of growing computing power and the availability of big data has enabled these systematic trading models to capitalise on market inefficiencies that were otherwise difficult to identify or harvest given the implied trading costs. However, this growth has met with some headwinds on two key accounts; firstly, trading models built using back-tests on historical data have often failed to deliver good returns in real time (as previously identified trends have broken down), and secondly, the diffusion of similar quant models which has led to crowding in the space and consequently depressed the returns from such strategies.
2016 has been quite a nerve-wrecking year as the global hedge fund industry anticipated and responded to a string of unexpected events. As such, market jitters were very much present for investors as the results of two major events which had happened - Brexit and the US Presidential Elections, had caught the world by surprise. The global hedge fund industry faced steep redemption pressure from investors this year, with total net outflows coming in at US$28.2 billion. On the other hand, managers posted good performance-based gains, up US$17.8 billion over the same period.
Eurekahedge’s global hedge funds infographic sums up the industry as at January 2017. Find out more about global hedge funds assets under management (AUM), asset flows into strategic and regional mandates, launches and closures, fund size, head office locations and the best and worst performances of the year.
New Ocean Capital Management Limited is a Bermuda-based asset manager with expertise investing in reinsurance risk products. New Ocean is focused on providing investors with risk-adjusted returns in the insurance and reinsurance convergence market. Chris McKeown has 30 years of experience in the reinsurance industry, including six years managing a traditional reinsurance portfolio (ACE Tempest Re), five years actively managing capital invested in alternative reinsurance risk structures (CIG Re/New Castle Re). Mr. McKeown also spent 15 years in the insurance brokerage business, in both business production and senior management roles (Guy Carpenter).