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.
The benchmark Eurekahedge Hedge Fund Index was down 1.31% in December, down 3.85% year-to-date. Total assets under management decreased by US$23.5 billion during the month as the sector witnessed performance-based decrease of US$11.3 billion while registering net asset outflows of US$12.2 billion. The total size of the industry now stands at US$2.34 trillion.
The Eurekahedge Hedge Fund Index was down 1.31% in December , outperforming the MSCI AC World Index which declined 7.61% in what turned out to be the worst month of 2018 for global equity markets. Concerns over the Fed’s stance which turned out to be less Dovish than what investors expected triggered major equity sell-offs around the globe, and sent major equity indices plummeting during the month.
The Eurekahedge Hedge Fund Index ended the month of December down 1.31% , dragging its year-to-date decline to 3.85% after five consecutive months of losses. Concerns over the US treasuries yield curve inversion and further Fed tightening in 2019 triggered a sell-off across the global equity markets, marking December as the worst month of 2018 for equity markets.
The Eurekahedge ILS Advisers Index ended 2018 down 2.93%, recording its second consecutive year of losses after 2017, during which the index slumped 5.60%. The catastrophic losses incurred by Hurricane Florence in September and Hurricane Michael in October weighed on the ILS fund managers’ returns throughout the fourth quarter of the year.
Hedge fund managers were on track to record their worst year since the 2008 global financial crisis as the combined onslaught of the global trade tension, Fed rate hikes, and various political concerns weighed on their returns. The Eurekahedge Hedge Fund Index was down 2.53% as of November 2018 year-to-date, slightly ahead of the underlying equity markets as represented by the MSCI AC World Index which slumped 2.72% over the same period. The industry kicked off the year with strong performance throughout January 2018, continuing the trend observed by the hedge fund industry in 2017. However, market uncertainty arose when the Trump administration imposed higher tariffs against imported Chinese goods due to their alleged unfair trade practices.
Eurekahedge’s global hedge funds infographic sums up the industry as at January 2019. Find out more about global 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.
Matthew Swann is Principal, Hiscox Re Insurance Linked Strategies, a US$1.6+ billion ILS fund manager within global specialty insurance group Hiscox Ltd (LND: HSX). Matthew joined Hiscox in 2007 as a catastrophe modeler where he developed retrocession pricing tools before moving to reinsurance underwriting in 2011. He joined Hiscox Re ILS in 2015 as Portfolio Manager and is currently responsible for advising on investment and product strategy, and business development. Matthew holds a geography degree from the University of Oxford and a PhD in climate prediction from the University of East Anglia.
Securitisation is the issuance of tradable financial instruments backed by a single asset or a group of assets. Through securitisation, assets receive an additional layer of accessibility in the financial markets, allowing for the funding of an investment strategy, or for financing based on an organisation’s creditworthiness, cash flow and/or collateral. The result of securitisation is a tradable financial instrument that can be purchased globally through brokerage accounts.