Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index declined 1.62% in February1 outperforming underlying markets as represented by the MSCI World Index2 which fell 3.68% over the same period. Among regional mandates, Latin American managers led the table, up 0.66% during the month while other regional mandated funds languished into negative territory. Across strategies, distressed debt hedge funds led the table with gains of 1.32% followed by arbitrage hedge funds which were up 0.53%.

Final asset flow figures for January revealed that managers reported performance-based gains of US$44.9 billion while recording net asset inflows of US$37.0 billion. Preliminary data for February shows that managers have posted performance-based losses of US$34.2 billion while recording net outflows of US$5.0 billion, bringing the current assets under management (AUM) of the global hedge fund industry to a total of US$2.49 trillion.

Figure 1a: Summary monthly asset flow data since January 2013
 

 

Key highlights for February 2018:

  • Hedge funds declined 1.62% in February and were up 0.37% year-to-date with total AUM growth still in the green despite losses in February which eroded the solid gains in January. Investor redemptions stood at US$5.0 billion in February while performance-based losses of US$34.2 billion were recorded. Almost 35% of the fund managers are in the red for the year in what is turning out to be the toughest start to the year for fund managers since 2016.
  • While hedge fund capital allocations were in the red for the month of February, investor subscriptions have favoured CTA/managed futures and event driven strategies which have seen inflows of US$0.8 billion each followed by long/short equities and arbitrage strategies with inflows of US$0.4 billion each.
  • Hedge funds managing in excess of US$1 billion reported their highest monthly performance-based decline on record, totalling US$25.5 billion while net outflows of US$4.6 billion were recorded. In contrast, sub-billion dollar hedge funds have fared relatively better with outflows of US$0.3 billion and performance-based losses of US$8.6 billion. The Eurekahedge Billion Dollar Hedge Fund Index was down 1.77% in February, its steepest monthly loss on record since the infamous May 2010 flash crash when the index lost 2.01%.
  • The US$264.3 billion CTA/managed futures mandated hedge funds reported their biggest monthly performance-based losses since June 2004, totalling US$19.4 billion in February bringing their 2018 year-to-date performance-based figures down to the red, with losses totalling US$9.2 billion.  Meanwhile, investors allocated US$0.8 billion into the mandate during the month and US$3.9 billion year-to-date.
  • The US$1.66 trillion North American hedge fund industry posted the steepest performance-based losses of US$25.9 billion among regional mandates during the month while investor redemptions of US$1.1 billion were recorded.  Asset base for the North American hedge fund industry grew by US$23.5 billion over the year with most of this growth attributed to net investor inflows of US$18.2 billion year-to-date, while performance-based gains totalling US$5.3 billion were recorded over the same period.
  • Asia ex-Japan mandated hedge funds posted the steepest decline among regional mandates during the month, down 2.30% with underlying Greater China and Indian hedge fund managers losing 3.49% and 1.76% respectively.  Performance-based losses of US$1.8 billion were recorded while investors redeemed US$0.8 billion from the mandate during the month.
  • The average performance fee charged by North American hedge funds jumped to 18.49% in 2017 from 17.60% in 2016, before dropping to a historic low of 14.17% as of January 2018. Currently, the average management fee charged by North American hedge funds stands at 1.38%. For more details, please refer to the 2017 Overview: Key Trends in North American Hedge Funds report.
  • The Eurekahedge Crypto-Currency Hedge Fund Index declined 16.83% in February, bringing its year-to-date losses to 22.47%, barely ahead of the price of bitcoin which declined 26% in the first two months of 2018.

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1 Based on 49.78% of funds which have reported February 2018 returns as at 14 March 2018
2 MSCI AC World Index (Local)
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