Asset Flows Update

The Eurekahedge Hedge Fund Index rallied 2.32% in January1 , supported by the strength in global equity markets which pushed the MSCI AC World Index2 7.36% higher, recovering from the losses it suffered back in December. Cautious tone from the Federal Reserve and positive expectations on the US-China trade talk resulted in strong gains across the global equity and fixed income markets during the month, despite lingering concerns over slowing economic growth. Weaker US dollar and improving trade outlook acted as tailwinds for fund managers with exposure toward Asia and emerging markets in general, resulting in positive returns across geographic mandates throughout the month. The majority of fund managers tracked by Eurekahedge ended the month in the positive territory as they were well-positioned to benefit from the suppressed market volatility.

Final asset flow figures for December 2018 revealed that hedge fund managers suffered performance-based losses of US$13.4 billion and investor redemptions of US$54.0 billion. Preliminary data for January shows that the industry saw US$22.1 billion of performance-driven gains as well as US$5.3 billion of net outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,309.2 billion as of January 2019, up roughly 0.7% during the month, in contrast to how the industry lost 6.3% of its assets in 2018.

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

Key highlights for January 2019:

  • The Eurekahedge Hedge Fund Index was up 2.32% in January, as the risk-on sentiment returned to the market, propelling the MSCI AC World Index (Local) up 7.36% during January. Throughout 2018, hedge fund managers posted losses of 4.08%, outperforming the global equity market which slumped 10.18% over the year.
  • The global hedge fund industry saw its assets decline US$154.4 billion throughout 2018, down 6.3% from its end-2017 figure – the largest yearly percentage drop since 2008, as fund managers struggled under the global trade tension and aggressive Fed rate hikes which caused elevated market volatility level through the better part of the year. Investors redeemed US$93.4 billion during the year, and US$61.0 billion of performance losses were recorded.
  • The long/short equities mandate suffered US$23.1 billion of performance losses and US$40.0 billion of net investor outflows in 2018, resulting in a 7.3% decline in total assets over the year. Fund managers utilising equity strategies kicked off 2019 with performance gains totalling US$23.1 billion in January. Despite that, investor redemptions of US$1.8 billion were recorded.
  • North American hedge fund managers recorded US$38.8 billion of performance-based losses, as well as US$46.0 billion of investor outflows in 2018, resulting in the biggest yearly decline in assets under management since the 2008 global financial crisis, during which the region’s asset base saw a US$214.4 billion decline.
  • Fund managers utilising AI/machine learning strategies returned 2.48% in January, after posting losses in eight out of the 12 months last year. Quant strategies continued their struggle with the CTA/managed futures mandate seeing US$29.0 billion of net outflows in 2018.
  • Returns across the CBOE Eurekahedge Volatility Indexes were mixed in January, with long volatility mandate down 5.28% and short volatility mandate up 4.02% as market volatilities dwindled throughout the month. The CBOE VIX Index plummeted 34.35% in January as the risk-off sentiment among investors eased off.
  • The Eurekahedge ILS Advisers Index was up 0.50% in January, ending its streak of losses through the final quarter of 2018 which resulted from catastrophic losses incurred by the 2018 Atlantic hurricane season. ILS fund managers posted losses of 5.60% and 3.57% in 2017 and 2018 respectively.
  • The Eurekahedge Crypto-Currency Hedge Fund Index declined 9.07% in January, narrowly outperforming Bitcoin which slumped 10.98% over the month. Crypto-currency hedge fund managers lost 71.86% throughout 2018, posting their worst year on record.
  • Funds of hedge funds ended 2018 down 4.58%, trailing behind the average hedge fund which would have lost 4.08% throughout the year. The fund of hedge funds industry saw investor redemptions totalling US$14.6 billion last year.

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1 Based on 49.86% of funds which have reported January 2019 returns as at 14 February 2019.
2 MSCI AC World Index (Local)