The benchmark Eurekahedge Hedge Fund Index was up 0.14% in January and 8.67% in 2019. Total assets under management increased by US$2.0 billion during the month as the sector witnessed performance based increase of US$1.6 billion while registering net asset inflows of US$0.4 billion. The total size of the industry now stands at US$2,304.6 billion.
The Eurekahedge Hedge Fund Index ended 2019 up 8.67%, recording its strongest annual performance since 2013 on the back of the de-escalation of the US-China trade war and accommodative central bank policies. Going into 2020, hedge fund managers returned 0.14% in January, outperforming the MSCI ACWI (Local) which slumped 0.90% over the month following the COVID-19 outbreak in China. Despite liquidity injection by the People’s Bank of China and the reduction of tariffs on US imports, investors remained concerned on the impact of the epidemic on the global economic outlook. Returns were mixed across regions in January, with Asia ex-Japan fund managers returning 0.93%, ahead of their peers focusing on North America, who ended the month down 0.11%. Long/short equities fund managers were down 0.35% in January as the weak equity market performance throughout the latter half of the month weighed on their returns.
The Eurekahedge Hedge Fund Index was up 0.14% in January, ahead of the underlying equity market as represented by the MSCI ACWI (Local) which lost 0.90% over the same period. Global equities rallied earlier into the month, supported by the easing tension in the Middle East and the signing of the US-China phase-one trade deal. The S&P 500 and the tech-heavy NASDAQ returned 2.29% and 1.97% respectively for the week ending January 17. However, market sentiment shifted rapidly towards the end of the month, following the coronavirus outbreak in China. Investors feared that the epidemic, which draws parallel to the SARS outbreak in 2003 might have an adverse impact on the global economic outlook.
The Eurekahedge ILS Advisers Index gained 0.92% in 2019, following two consecutive years of losses during which ILS fund managers with catastrophe risk exposure suffered from the damage caused by the Atlantic hurricane seasons. Despite being a period of calm insurance losses, 2019 saw ILS fund managers languishing under loss creep from upward adjustments in estimated losses of past events. Insurance-linked securities (ILS) hedge funds trade in instruments whose values depend on insurance loss events. The majority of these instruments are reinsurance policies that assume the risk taken by insurance companies, which in turn assume the risk taken by individuals or institutions.
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. Islamic financial products are accessible to all investors, some of whom choose to allocate into Islamic funds for purposes of portfolio diversification or their preference in investing in products which deemed as socially responsible. In recent years, Islamic finance has been catching on with traditional finance institutions as international banks have expanded into providing Islamic finance services.
Eurekahedge’s Islamic hedge funds infographic sums up the industry as at February 2020. Find out more about Islamic 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.
Dino has over 27 years of experience in global trade finance and debt markets both in the banking and investment management sectors. He has served as global head of trade finance related products for Standard Chartered Bank, Standard Bank, and Banco Santander where he managed trading and investment portfolios in the trade finance related sector and market leading origination and trading desks.
The year 2019 has seen responsible business, climate change and impact financing feature high on the agenda with increasing focus on the sector by investors, regulators, trade bodies and financial institutions. As a result, there is growing evidence of the influence of environmental, social and governance ("ESG") factors in mainstream finance.
On 8 January 2020, the Cayman Islands Government published a draft Private Funds Bill, 2020 (the Bill) and a draft amendment to the Mutual Funds Law (2019 Revision) (MFL Amendment). The proposed legislation is a result of certain EU and other international recommendations and has been developed to align the Cayman Islands investment fund regulatory regime with other jurisdictions. The Bill and the MFL Amendment are expected to be put before the Cayman Islands Legislative Assembly on 30 January 2020, where final amendments may be made before they are passed into law. It is expected that there will then be a transition period for existing structures.
The Wall Street Journal recently reported that the SEC’s Office of Compliance Inspections and Examinations (“OCIE”) has sent letters to asset management firms that market and offer environmental, social, and governance (“ESG”) investment products. Below are some key takeaways that asset managers should know and do as the SEC focuses in on asset managers that offer impact investment strategies.
The U.S. Securities and Exchange Commission (the “SEC”) has issued a release (the “Proposing Release”) (available here) proposing amendments that expand the definitions of “accredited investor” (“AI”) and “qualified institutional buyer” (“QIB”). The AI definition is used principally to determine to whom an offering can be marketed in a private placement under Rules 506(b) and 506(c) of Regulation D, and the QIB definition is used principally to determine to whom securities can be resold in a sale structured under Rule 144A.
The FCA has outlined some key risks of harm in the asset management and alternative investments sectors and the steps that firms should take to address these risks. Firms may therefore need to make changes to their current practices and procedures.