Asset Flows Update

The Eurekahedge Hedge Fund Index was up 0.87%1 in May, supported by the robust performance of the global equity market as represented by the MSCI ACWI (Local) which gained 0.83% over the same month. Year-on-year US inflation rose to 5.0% for May from 4.2% in April, the highest level in over a decade. The heightened inflation figures worried investors who were concerned that this could force the Federal Reserve to tighten monetary policy earlier than expected to achieve its 2% average inflation goal. Nevertheless, the Federal Reserve has reassured market participants that any adjustment to monetary policy will be conducted only after the economy has made significant progress towards a strong economic recovery and attaining full employment. The S&P 500 and DJIA recorded new all-time highs in the first week of May and ended the month with gains of 0.55% and 1.93% respectively, supported by the strong economic momentum as reflected in the composite purchasing managers' index (PMI) which rose to a record high of 68.1 in May. Over in Europe, returns were positive among equity benchmarks in the region with the CAC 40 and DAX Index taking the lead with gains of 2.83% and 1.88% respectively. European equities were supported by the rising vaccination rates in Europe, which helped to increase the prospects for a strong economic rebound. Returns were positive across geographic mandates in May with Latin American and Asia ex-Japan hedge funds gaining 2.14% and 1.34% respectively while Japanese hedge funds were up 0.54%. Across strategies, CTA/managed futures and macro outperformed their strategic peers with returns of 1.59% and 1.51% respectively throughout the month.

Final asset flow figures for April showed that hedge fund managers recorded performance-based gains totalling US$33.7 billion on top of net investor allocations of US$19.7 billion throughout the month. Preliminary data for May estimates that the global hedge fund industry witnessed US7.1 billion of performance-driven gains combined with US$22.1 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2372.7 billion as of May 2021. The global hedge funds industry has seen US$78.3 billion of performance-based gains and US$45.9 billion of investor allocations throughout in 2021.

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

Key highlights for May 2021:

  • Hedge fund managers were up 0.87% in May, supported by the strong performance of the global equity market which returned 0.83% during the month. In terms of 2021 performance, global hedge funds were up 7.71%, recording the strongest May year-to-date return since 2009 despite the ongoing pandemic. Roughly 71.4% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in May, and 29.9% of the hedge fund managers in the database were able to maintain a double-digit return in 2021.
  • On an asset-weighted basis, hedge funds were up 1.38% in May, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is up 4.82%, recording their best May year-to-date return since 2009.
  • The Eurekahedge North American Hedge Fund Index was up 0.86% in May, outperforming the S&P 500 and NASDAQ which returned 0.55% and -1.53% respectively. In terms of 2021 performance, North American hedge funds have returned 10.16%, outperforming their regional peers as the continued speedy roll out of COVID-19 vaccinations enabled the reopening of more industries and boosted the momentum of the economic recovery.
  • The Eurekahedge Emerging Markets Hedge Fund Index was up 1.54% in May, outperforming their developed market counterparts as emerging markets equities benefitted from the 1.57% decline of the US Dollar Index in May. In terms of 2021 performance, emerging markets funds have returned 5.30%, lagging behind their developed market counterparts as North American and European hedge funds returned 10.16% and 6.00% over the same period respectively.
  • The Eurekahedge Macro Hedge Fund Index gained 1.51% in May, extending their streak of consecutive positive returns to seven months. The Federal Reserve signalled their intent to consider tightening monetary policy only after the economy had made significant progress towards a strong recovery, allaying fears that interest rates would be raised prematurely.  In terms of 2021 performance, the index returned 5.16% - recording their highest May year-to-date return since 2009.
  • Fund managers focusing on cryptocurrencies were down 6.83% in May as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, outperforming Bitcoin which lost 32.88% over the same period. In terms of 2021 return, cryptocurrency hedge funds gained 120.65%, outperforming Bitcoin which returned 24.27% over the first 5 months of the year.

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1Based on 52.21% of funds which have reported May 2021 returns as at 14 June 2021