Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index was down 0.34% in June1 while underlying markets as represented by the MSCI World Index2 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%.
                                                   
Final asset flow figures for May 2018 revealed that managers reported performance-based losses of US$6.2 billion while recording net asset outflows of US$16.4 billion. Preliminary data for June shows that managers have posted performance-based losses of US$2.5 billion while recording net asset outflows of US$1.3 billion. This brings the current assets under management (AUM) of the global hedge fund industry to a total of US$2.46 trillion.

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

Key highlights for June 2018:

  • Hedge funds were down 0.34% in June with 1H 2018 returns barely hanging in the green with a flat 0.08% gain year-to-date. This would be the weakest first half performance of hedge funds on record since 2000. To contextualise, the strongest gain occurred in 1H 2009 when hedge funds gained 10.62% while the next weakest 1H performance came in 1H 2010 when managers posted gains of 0.91%.
  • Total hedge fund assets grew by US$8.8 billion over the past six months, which compares with a growth in total AUM of US$98.5 billion over the same period last year.
  • Rising US-China trade war tensions and a strengthening US dollar have spelled trouble for Asian hedge fund managers in 1H 2018. Greater China focused mandates are down 0.44%, though outperforming the Shanghai and Shenzhen composites by well over 10%. Korea mandated hedge funds are down 4.21% over the same period, ahead of the Kospi Index which is down 5.73%. Meanwhile India mandated hedge funds have struggled with losses of 5.26%, underperforming the BSE Sensex Index by 9.27% in the first half of 2018.
  • Assets under management for CTAs have shrunk by 9.81% in 2018 as underlying managers posted their fifth consecutive month of investor redemptions with net outflows totaling US$7.1 billion.
  • Event driven hedge funds remain the bright spot across all strategic mandates in 1H 2018, posting performance based gains of US$3.3 billion and attracting net investor inflows of US$4.4 billion. The Eurekahedge Event Driven Hedge Fund Index is up 2.59% year-to-date with underlying Asian event driven managers up 8.26% for the year.
  • Across regional mandates, European hedge funds have posted a small decline in assets under management to the tune of US$5.9 billion. North American hedge funds have had the strongest showing for this year seeing AUM grow by US$11.9 billion. Meanwhile emerging markets focused hedge funds have seen their assets decline by US$6.8 billion.
  • Asian hedge funds continue their struggle in 1H 2018 with losses of 0.61%, though outperforming underlying markets as the MSCI AC Asia Pacific Index (Local) posted losses of 3.47%. Japan mandated hedge funds are down 2.70% in 1H 2018, ahead of the 4.77% loss posted by underlying markets as captured by the Tokyo Topix Index.

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Footnote
1 Based on 55.10% of funds which have reported June 2018 returns as at 15 June 2018
2 MSCI AC World Index (Local)
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