Asset Flows Update

The Eurekahedge Hedge Fund Index was up 2.52%1 in July, supported by the robust performance of the underlying global equity markets as represented by the MSCI ACWI IMI (Local) which gained 3.67% over the month. The highlight of the month was the continued support for markets by global central banks, which once again pulled no surprises. While the debate around MMT (Modern Monetary Theory) continues to pick pace, in the presence of high unemployment and the absence of inflation, it appears that MMT proponents will have a walk over of sorts. This should continue to bode well for financial markets which are so far defying the natural laws of gravity that has otherwise stalled real economic activity globally. In the US, despite the fear of the increasing number of COVID-19 cases, the equity market in the region exhibited a strong run driven by the upbeat Q2 earnings of tech-companies, particularly the FAANG stocks, which beat market expectation. The tech-heavy NASDAQ was up 8.82%, pushing its year-to-date return to 19.76%, while the S&P 500 returned 6.53% throughout the month, bringing its 2020 performance back into positive territory. On the other hand, European equities underperformed their regional peers as the US-China tensions and weak corporate earnings weigh down on their performance. The DAX ended the month of July largely flat, while the CAC 40 registered 3.09% losses over the same period. Over in Asia, the Chinese economy displays a robust recovery from the crisis, as seen from their strong PMI numbers and double-digit Q2 GDP growth, which contributed to the strong performance of underlying equity market returns in the region. The Shenzhen Composite and CSI 300 registered 14.24% and 12.20% throughout the month of July.

Final asset flow figures for June showed that hedge fund managers recorded performance-based gains totalling US$10.6 billion and net investor redemptions of US$11.3 billion throughout the month. Preliminary data for July estimates that the global hedge fund industry witnessed US$22.1 billion of performance-driven gains combined with US$21.3 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,151.6 billion as of end-July 2020. The global hedge funds industry has seen US$75.0 billion of performance-based decline and US$76.0 billion of investor redemptions over the first seven months of 2020.

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

Key highlights for July 2020:

  • Global hedge funds posted their 4th consecutive month of gains in July and are up 1.65% for the year versus a 3.61% decline for the MSCI AC World Index USD. Almost 20.2% of hedge fund managers have posted double digit returns in 2020 despite a challenging start to the year.
  • Assets under management for the global hedge funds industry have rebounded increasing by US$113.0 billion over the four-month period ending July 2020. This has come from performance-driven gains of US$103.0 billion and net investor flows of US$10.0 billion. This marks a sharp recovery following US$264.1 billion asset decline in Q1 2020.
  • The Eurekahedge Long Short Equities Hedge Fund Index was up 2.52% in July, recovering from losses on the back of the global equity market’s strong run in the second quarter of the year. In terms of year-to-date performance, the long/short equities hedge funds were up 1.25% over the first seven months of the year.
  • The Eurekahedge Greater China Long Short Equities Hedge Fund Index was up 8.40% in July, bringing its year-to-date return to 19.34%. Almost 20% of the managers have delivered returns in excess of 20% with the Top 3 managers gaining over 50% year-to-date. The faster-than-expected economic recovery of the Chinese economy as reflected from its strong PMI numbers and double-digit Q2 GDP growth, boosted the performance of the underlying equity market in the region.
  • The Eurekahedge Multi-Strategy Hedge Fund Index was up 3.06% during the month. Fund managers with exposure to equities and investment-grade bonds were the primary performance contributor to the mandate. In terms of year-to-date return, fund managers utilising multi-strategies were up 1.73% over the first seven months of 2020.
  • Emerging markets focused hedge fund strategies were up 4.98% in July, bringing their year-to-date returns to 5.82%. In the four months ending July, emerging markets investing hedge fund managers have racked up gains of 18.26%. In contrast developed market mandates as represented by North America, Europe and Japan are up 12.43%, 8.46% and 3.48% respectively.
  • Hedge funds utilising AI strategies were up 0.99% in July – recording their fifth consecutive month of positive performance. On a year-to-date basis, the Eurekahedge AI Hedge Fund Index was up 3.62% as of July 2020.
  • Hedge fund managers investing in precious metals such as gold or silver were up 54.47% in the last four months ending July. On a year-to-date basis these managers are up 39.96% in 2020, following gains of 34.81% in 2019. In contrast managers focused on crypto-currencies are up 49.89% as of July 2020 year-to-date, following gains of 15.56% in 2019.

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1 Based on 46.28% of funds which have reported July 2020 returns as at 13 August 2020