The Eurekahedge Report - July 2018

July 2018 | Eurekahedge

The benchmark Eurekahedge Hedge Fund Index was down 0.34% in June, up 0.08% year-to-date. Total assets under management decreased by US$3.8 billion during the month as the sector witnessed performance-based decrease of US$2.4 billion while registering net asset outflows of US$1.3 billion. The total size of the industry now stands at US$2.46 trillion.

Asset Flows Update

July 2018 | Eurekahedge

The Eurekahedge Hedge Fund Index was down 0.34% in June while underlying markets as represented by the MSCI World Index declined 0.21% over the same period. Regional mandates across the board with the exception of Australia/New Zealand mandated hedge funds ended the month in the red, with emerging markets, in particular Asia-focused strategies seeing the largest declines. Across strategies, event driven hedge funds led the table with gains of 1.17% followed by relative value hedge funds which were up 0.66%.

Hedge Fund Performance Commentary

July 2018 | Eurekahedge

The Eurekahedge Hedge Fund Index slumped 0.34% during the month of June, as managers struggled under the volatile market situation driven by the escalating US-China tariff spat over the month. The transitory ceasefire in the trade war was effectively ended when the White House announced a 25% tariff on US$50 billion of Chinese exports on June 15, which prompted China to respond in kind. Roughly 46% of the hedge fund managers tracked by Eurekahedge managed to outperform the underlying global equity markets as represented by the MSCI AC World Index (Local) which declined 0.21% over the month. The Eurekahedge Hedge Fund Index wrapped the first half of 2018 with a positive yet unremarkable return of 0.08% after spending three months in the red, a far cry from the 3.36% gain posted by the index over the first half of 2017.

The hedge fund ESG experience: the rise of conscientious and responsible alternative investing

July 2018 | Eurekahedge

Investors are increasingly beginning to incorporate ethical considerations into their investment decisions, a development which has given rise to the ESG framework over the years. Despite the implementation challenges which arise when screening investments against acceptable environmental, social and corporate governance themes, the trend towards a more conscientious approach to investment is here to stay, especially from the perspective of large institutional investors. Fund managers, for both actively and passively managed investment vehicles are balancing their quest for superior returns with the need to meet investor demand for responsible investing. Further, an understanding that such an approach to investment can translate into ‘ESG induced alpha’ for managers is further helping the cause of ethically guided investing. This article looks at the performance of funds, both long-only absolute return vehicles and hedge funds, with an active ESG investment framework and how they have

2018 Key Trends in European Hedge Funds

July 2018 | Eurekahedge

The Eurekahedge European Hedge Fund Index gained 0.56% in the first half of 2018, ahead of their global peers’ performance as indicated by the Eurekahedge Hedge Fund Index which was up 0.39% over the same period. European hedge funds returned 7.10% in 2017 on the back of the underlying equity markets’ rally throughout the year, supported by strengthening oil and commodity prices, combined with the unwinding of geopolitical risks within the region. Going into 2018, market volatilities returned and weighed down on the alternative investment industry’s performance. Regional risk outlook seemed to be tilted downward as trade concerns over the steel and aluminium tariffs imposed by the Trump administration and the uncertainties looming over Brexit deals may pose as headwinds against the European economies for the upcoming months.

2018 Key Trends in Long-Only Absolute Return Funds

July 2018 | Eurekahedge

Absolute return funds ended the year 2017 with an impressive gain of 20.44%, beating their hedge fund and fund of hedge fund peers which returned 8.19% and 7.18% respectively, by riding on the global equity market rally which propelled the MSCI AC World IMI Index (Local) to rise 17.51% throughout the year. However, market volatilities struck back in the first half of 2018, and absolute return fund managers were down 0.39% as of May 2018 year-to-date, trailing behind hedge fund managers who returned 0.39% over the same period, owing to the downside protection provided by their hedging strategies.

European Hedge Funds Infographic July 2018

July 2018 | Eurekahedge

Eurekahedge’s European hedge funds infographic sums up the industry as at July 2018. Find out more about European 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.

Interview with Manuel Anguita, CFA, Co-Founder of Silver 8

July 2018 | Eurekahedge

Manuel Anguita is the co-founder of Silver 8, a US-based fund focused on financial technology. Silver 8 was the ranked in the Top 1% of hedge funds globally based on AY 2017 returns and in the Top 15 hedge funds based on annualised returns since inception (Eurekahedge). Silver 8 is one of the pioneer institutional investors in blockchain technology and digital assets.

Developments in the UK Venture Capital Tax Relief Regimes

July 2018 | Rob Young and Will Egan, Taylor Wessing

The UK has a well-established suite of reliefs designed to incentivise equity investment in companies in the early stages of their existence. This article focuses on developments in these venture capital schemes, particularly the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trust regime (VCTs) and recent trends and developments, with a particular focus on the changes introduced in the Finance Act 2018.

Income Tax Planning for Investment Management Expenses via a Family Office

July 2018 | Gary M. Kirk, Lane Powell PC

The Federal tax legislation enacted in December 2017 contained many changes that affect high net worth families and their investment and business activities. One change was to prohibit an individual’s deduction for miscellaneous itemised deductions that we have discussed in a prior article . Brief recap: miscellaneous itemised deductions consist of a hodgepodge of unrelated itemised deductions.

Latest Department of Labor Guidance on Economically Targeted Investments and Shareholder Engagement: Requires Plan Fiduciaries to Step Carefully

July 2018 | David M. Glaser, Bernard F. O’Hare, Douglas L. Tang and Jessica S. Carter, Patterson Belknap Webb & Tyler LLP

In late April, the Department of Labor (“DOL”) released FAB 2018-01 addressing and clarifying previous guidance concerning economically targeted investments (“ETIs”), shareholder engagement and proxy voting

On the EMIR Compromise: Reflections and Preliminary Considerations

July 2018 | Eduardo Barrachina, White & Case LLP

Currently under EMIR the clearing obligation only ceases to apply if a NFC+ no longer exceeds the relevant clearing threshold for a period of 30 working days.

President Signs Dodd-Frank Reform Legislation

July 2018 | Mark S. Bergman, David S. Huntington, Brian M. Janson, Raphael M. Russo and Hank Michael, Paul, Weiss, Rifkind, Wharton & Garrison LLP

On May 24, following passage in both the House and Senate earlier this year, President Trump signed into law a financial services reform bill relaxing certain elements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank”). The bill, titled the “Economic Growth, Regulatory Relief, and Consumer Protection Act" (the “Act”), limits the application of various provisions of Dodd-Frank to small and mid-sized banks and raises asset thresholds above which larger banks are subject to increased oversight and regulation. The Act also amends certain other provisions of the federal securities laws. Unlike earlier proposed legislation seeking a comprehensive re-working of Dodd-Frank, such as the Financial CHOICE Act (see memorandum on the proposed legislation here), the Act preserves the basic structure of Dodd-Frank while making various targeted adjustments.

Proposed Revisions to the Volcker Rule—Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds

July 2018 | Mark V. Nuccio and Gideon Blatt, Ropes & Gray

On May 30, 2018, the Federal Reserve Board issued a notice of proposed rulemaking and asked for comment on a proposed rule to simplify and tailor compliance requirements relating to the regulation implementing section 13 (commonly known as the “Volcker Rule”) of the Bank Holding Company Act (“BHC Act”) (the “Proposal”). The Proposal was developed jointly with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission (together, the “Agencies”).