News & Events

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index gained 0.32% in November1 while underlying markets as represented by the MSCI World Index2 was up 1.16% over the same period. Among regional mandates, Asia ex-Japan managers posted the best gains, up 1.53% during the month followed by Japanese and North American hedge funds seeing gains of 1.06% and 0.86% respectively. Across strategies, relative value hedge funds led the table with returns of 0.89% followed by long/short equities and multi-strategy hedge funds which were up 0.75% and 0.22% respectively, the only two strategies who posted 12 consecutive months of gains in 2017 as global equity markets continue to rally throughout the year.

Final asset flow figures for October 2017 revealed that managers reported performance-based gains of US$27.1 billion while recorded net asset outflows of US$4.6 billion. Preliminary data for November shows that managers have posted performance-based gains of US$4.3 billion. Preliminary net asset flows were positive in November with US$10.7 billion of inflows into the industry. Redemption pressure appears to have eased throughout the year as investors’ appetite improved with strong investor allocations into hedge fund regional and strategic mandates. This brings the current assets under management (AUM) of the global hedge fund industry to a record high of US$2.41 trillion.

Figure 1a: Summary monthly asset flow data since January 2012
 

 

Key highlights for November 2017:

  • Hedge funds were up 7.27% for the year, posting better performance compared to a modest 3.68% gains last year. Asset base for the industry grew by US$188.2 billion in 2017, with US$94.7 billion of the gains in assets attributed to investor inflows and US$93.5 billion attributed to performance-based gains. This compares with an AUM contraction of US$20.0 billion in 2016 where investor redemptions stood at US$55.1 billion while performance-based gains came in at US$35.1 billion.
  • Almost 76% of hedge fund managers have posted positive returns in 2017, their highest proportion on record since 2013. Around 29% of the managers have posted gains exceeding 10% this year while around 6% of the managers have posted losses exceeding 10%.
  • Fund closures continued to outpace launch activities for the second consecutive year with 555 funds liquidating in 2017 whilst the number of startups for the year stood at 489. Asia and North America have seen a net growth in fund population while Europe witnessed a decline for the third year running.
  • Asia-ex-Japan investing funds have delivered the best returns globally and were up 19.89% for the year. Assets managed by Asia-ex-Japan grew by US$19.8 billion year-to-date with US$6.2 billion attributed to investor inflows and US$13.6 billion attributed to performance-based gains. Within the region, Greater China mandated hedge funds were up 28.27% for the year, outperforming the CSI 300 Index by 7.24%.
  • North American hedge funds were up 5.66% year-to-date and have received the highest investor allocations among all regional mandates with inflows of US$58.1 billion. This compares to redemptions totaling US$11.1 billion over the same period last year. On the other hand, investor’s allocations into Europe stood at US$23.4 billion as of 2017 year-to-date.
  • Average performance and management fees charged by new hedge funds launched in 2017 stand at 17.11% and 1.26% respectively, this compares with figures of 16.52% and 1.41% for 2016.
  • Relative value hedge funds posted the best returns among all strategic mandates during the month, up 0.89% with their assets grew US$5.9 billion for the year, with underlying relative value volatility hedge funds posting impressive gains of 8.62% in 2017 outperforming other volatility-focused hedge funds.
  • Distressed debt managers posted their sixth consecutive month of redemptions, totaling US$2.0 billion, the only strategy that posted redemptions for the year while recorded modest performance-based gains of US$1.5 billion. Total AUM for the strategy has declined by almost US$0.51 billion year-to-date.
  • Average performance and management fees charged by new launches in Europe this year stood at historic lows, with average performance fees of 14.04% being recorded while average management fees were down to 1.15%. The US$545.6 billion European hedge fund industry grew by US$39.7 billion for the year. For details refer to the European Hedge Fund Key Trends Report December 2017.

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Footnote
1 Based on 48.05% of funds which have reported November 2017 returns as at 13 December 2017
2 MSCI AC World Index (Local)
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