Research

Asset Flows Update

Introduction

Hedge funds edged higher in the final month of the year, with the Eurekahedge Hedge Fund Index gaining 0.86% in December1 while underlying markets as represented by the MSCI World Index2 was up 1.19% over the same period. Among regional mandates, Latin American managers led the table, up 2.50% during the month followed by Asia ex-Japan managers who were up 1.41%. Across strategies, event driven hedge funds led the table in December with gains of 1.57% followed by multi-strategy hedge funds which were up 1.31%.

Final asset flow figures for November revealed that managers reported performance-based gains of US$6.9 billion while recording net asset inflows of US$17.0 billion. Preliminary data for December shows that managers have posted performance-based gains of US$9.4 billion while recording net inflows of US$12.5 billion. Redemption pressure eased in 2017 following a renewed interest from investors and positive sentiment surrounding North American mandates which buoyed allocation activity into hedge funds. This brings the current assets under management (AUM) of the global hedge fund industry to a total of US$2.44 trillion, with annual asset growth totalling over US$219.0 billion as of December 2017.

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

 

Key highlights for December 2017:

  • Hedge funds were up 8.25% for the year – almost 79% of fund managers are in positive territory for the year while another 19% have outperformed the MSCI ACWI Local Index which was up 17.55% in 2017. Back in 2016, only 58% of the managers were in the green though 25% of managers had outperformed the MSCI ACWI Local Index.
  • Asset base for the industry grew by US$219.0 billion in 2017 – the highest growth in AUM since 2014 with US$113.5 billion of the gain in assets attributed to investor inflows and US$105.5 billion attributed to performance-based gains. This compares with an AUM decline of US$20.1 billion in 2016 where investor redemptions stood at US$55.1 billion while performance -based gains came in at US$35.1 billion.
  • Fund closures outpaced launches for the second consecutive year with 555 funds shutting down in 2017 compared to 489 new launches. In 2016, 769 funds liquidated while 700 launches were recorded.
  • AUM for long/short equities hedge fund managers grew by US$93.0 billion for the year on the back of strong performance-based gains. Long/short equities hedge fund managers were up 12.39% for the year – the best performing strategy in 2017 with equity-long bias funds up 16.85%.
  • The Eurekahedge Crypto-Currency Hedge Fund Index remained unstoppable with 1167.26% gain as of 2017 year-to-date, propelled by Bitcoin’s soaring price.
  • Billion dollar hedge funds recorded strong investor interest as of 2017, with net inflows totalling US$64.1 billion while the sub-billion dollar club has accounted for US$49.4 billion in net inflows as investor appetite for hedge funds continues to improve.
  • AUM for the North American hedge fund industry reached a record high of US$1.63 trillion. Investor subscriptions for 2017 year-to-date stood at US$66.8 billion, with US$67.3 billion of performance-based gains recorded over the same period of time.
  • The average performance fees charged by hedge funds that launched in 2017 stands at 17.11%, up from 2016’s 16.52% figure and is the highest since 2011. On the other hand, average management fees has declined to 1.26% this year from 1.41% in 2016.
  • Asian managers saw asset growth of US$25.4 billion for annual year 2017, with total net inflows of US$9.4 billion recorded, while performance-based gains stood at US$16.0 billion. The Asian hedge fund industry oversees 8% of total global assets, or US$195.1 billion in AUM as of 2017. Asia ex-Japan managers were up 20.87% in 2017, with underlying Greater China and Indian managers up 28.83% and 31.35% respectively. Japan focused funds were up 12.54% over the same period.

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Footnote
1 Based on 33.52% of funds which have reported December 2017 returns as at 10 January 2018
2 MSCI AC World Index (Local)
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