Research

Asset Flows Update

The Eurekahedge Hedge Fund Index was down 2.27% in October1 while underlying markets as represented by the MSCI World Index2 declined 7.33% over the same period. Concerns over rising interest rates in the US coupled with the prospects of political indecisiveness and turmoil in Washington following the Democrat’s House win saw US markets trade lower and give back their gains for the year. This compounded troubles for European markets which were already under pressure from Brexit and Italy. Asian markets fared no better and saw the selloff exacerbate as they reeled from the damaging impact of the ongoing US-China trade war. Across strategies, long/short equities hedge funds were the worst performing seeing a monthly loss of 3.32% as global equity markets sold of en masse.

Final asset flow figures for September 2018 revealed that managers reported performance-based gains of US$7.8 billion while recording net asset outflows of US$8.4 billion. Preliminary data for October shows that managers have posted performance-based losses of US$20.7 billion while recording net asset outflows of US$17.9 billion. This brings the current assets under management (AUM) of the global hedge fund industry to US$2.41 trillion.

As full data flows in towards month end, we expect the performance based losses to almost double and match the scale of losses we saw in February earlier this year when hedge funds posted performance based losses of US$44.2 billion.

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

Key highlights for October 2018:

  • Hedge funds were down 2.15% for the year, their weakest performance on record since 2008 when they declined -9.55% in the 10 months through to October. Almost 47% of the managers are in the green for the year with roughly 8% of the managers posting double digit gains as tracked in the Eurekahedge Global Hedge Funds Database.
  • Total assets under management have decreased by US$32.2 billion as of October 2018 year-to-date, compared with an increase of US$173.2 billion over the same period last year as performance-driven losses and investor redemptions have capped asset growth. Barring January earlier this year, investors have redeemed US$53.5 billion from hedge funds globally through to October. For detailed asset flow breakdown across regions, strategies and fund size mandates click here.
  • Emerging markets focused mandates are in the red for the year down 4.57% year-to-date, with Asian managers down 8.02% for the year with the underlying Eurekahedge Greater China Hedge Fund Index posting losses of 13.94% as of October 2018.
  • Across strategies, distressed debt, relative value and fixed income hedge funds lead for the year up 5.58%, 1.58% and 0.81% respectively.
  • Hedge funds were down 2.15% for the year, their weakest performance on record since 2008 when they declined -9.55% in the 10 months through to October. Almost 47% of the managers are in the green for the year with roughly 8% of the managers posting double digit gains as tracked in the Eurekahedge Global Hedge Funds Database.
  • Total assets under management have decreased by US$32.2 billion as of October 2018 year-to-date, compared with an increase of US$173.2 billion over the same period last year as performance-driven losses and investor redemptions have capped asset growth. Barring January earlier this year, investors have redeemed US$53.5 billion from hedge funds globally through to October. For detailed asset flow breakdown across regions, strategies and fund size mandates click here.
  • Emerging markets focused mandates are in the red for the year down 4.57% year-to-date, with Asian managers down 8.02% for the year with the underlying Eurekahedge Greater China Hedge Fund Index posting losses of 13.94% as of October 2018.
  • Across strategies, distressed debt, relative value and fixed income hedge funds lead for the year up 5.58%, 1.58% and 0.81% respectively
  • Long/short equities mandate bore the brunt of the equity market selloff in October, with the Eurekahedge Long Short Equities Hedge Fund Index ending the month down 3.32%, dragging its year-to-date return into the red (-3.07%) for the first time in the year. Nearly 80% of funds constituting the mandate posted losses in October, owing to the weak equity market performance over the month which resulted in performance-based losses of US$13.8 billion globally.
  • Assets under management for CTAs/managed futures strategies have shrunk by almost 11% in 2018 - corresponding to a decline in AUM of US$30.7 billion in the first ten months of the year. Meanwhile multi-strategy hedge funds have recorded the steepest redemptions for the year totalling US$23.1 billion.
  • The CBOE Eurekahedge Long Volatility Hedge Fund Index ended the month gaining 3.76% in as the risk-off sentiment returned to the markets. The CBOE VIX index spiked to roughly double of its end September value throughout the month. On the other hand, fund managers utilising short volatility strategies posted the steepest losses of 4.86% in October.
  • The Eurekahedge ILS Advisers Index declined 1.37% throughout the month of October, dragging its year-to-date return to 0.15%. As the catastrophic losses incurred by Hurricane Florence and Hurricane Michael come to light, ILS funds with exposure towards the region were adversely affected.

The full article is available in The Eurekahedge Report accessible to paying subscribers only.

Subscribers may continue to login as usual to download the full report and non-subscribers may email database@eurekahedge.com to enquire on how to obtain the full research report.


Footnote
1 Based on 57.59% of funds which have reported October 2018 returns as at 15 November 2018.
2 MSCI AC World Index (Local)
Chat