Research

Hedge Fund Performance Commentary

Introduction

The Eurekahedge Hedge Fund Index declined 2.27%1, throughout the volatile month of October, dragging its year-to-date decline to 2.15% in what turned out to be the worst month for the global hedge fund industry since 2011. Despite the carnage in the global equity markets, the majority of the hedge fund managers tracked by Eurekahedge outperformed the underlying market as represented by the MSCI ACWI AC (Local), which slumped 7.33% during the month. Approximately 60% of the funds comprising the Eurekahedge Hedge Fund Index were forced to end the month in the red, as volatile markets and difficult trading situations posed headwinds for hedge fund managers. In terms of year-to-date performance, preliminary numbers revealed that just under 6% of the hedge fund managers tracked by Eurekahedge were able to maintain double-digit returns following the October bloodbath - the lowest proportion ever recorded.

North American hedge fund managers ended the month down 2.54%, trailing behind the global industry average as the underlying equity market of the region slumped. The S&P 500 index was down 6.94% in October despite healthy economic fundamentals, receding unemployment, and robust corporate earnings season. Over in Asia, concerns over global trade friction, slowing economic growth, as well as the Fed’s tightening continued to be the key themes in October, and exerted pressure on the region’s equities and currencies. The Eurekahedge Asia ex Japan Hedge Fund Index was down 4.90% in October, its eighth month of losses thus far in 2018.

Figure 1: October 2018 and September 2018 returns across regions
 

On a year-to-date basis, North American fund managers were up 0.62%, as the losses they posted in October wiped out a significant portion of the gains made in the preceding months. Latin American fund managers were up 8.57% year-to-date, owing to the underlying equity market performance which benefited from improving economic outlook tied to the recent presidential election in Brazil. Meanwhile, Asian fund managers continued to lag behind their peers focusing on other regions, with the Eurekahedge Asia ex Japan Hedge Fund Index and the Eurekahedge Japan Hedge Fund Index down 9.54% and 5.15% year-to-date respectively, following consecutive months of losses.

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Footnote
1 Based on 57.59% of funds which have reported October 2018 returns as at 15 November 2018

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