Asset Flows Update

The Eurekahedge Hedge Fund Index was up 1.51%1 in October, supported by the strong rally of the global equity market as represented by the MSCI ACWI (Local) which returned 4.61% over the same period. Investors shrugged off concerns over enduring inflation pressures to make further upward progress, buoyed by strong corporate earnings, and the dovish stance of the Fed towards their monetary policy rate which acted as a tailwind to the performance of the global equities. The three major US stock indices generated their best month of the year, with the DJIA, S&P 500 and NASDAQ gained 7.27%, 6.91% and 5.84% respectively. Nevertheless, the persistent inflation has placed upward pressure on interest rates with the US 2-year Treasury rising by 22bp and the 10-year rising by 7bp to finish the month at 0.50% and 1.56% respectively as markets priced in a tightening of financial conditions. The Fed announced that it will soon begin tapering its monthly bond purchases later in November at a pace of US$15 billion each month from the current US$120 billion a month that the Fed is purchasing. Over in Europe, returns were positive among equity benchmarks in the region with the Euro Stoxx 50, CAC 40 and DAX up 5.00%, 4.76% and 2.81% respectively. The European Central Bank kept policy unchanged at the October ECB meeting as it continues to see the current inflation overshoot as temporary, supporting investor sentiment in the region. Returns were mixed across geographic mandates in October with North American hedge funds leading the group with a return of 2.36% while Latin American hedge funds trailed behind their regional peers with a return of -3.67%. Across strategies, CTA/managed futures and event driven outperformed their strategic peers with returns of 2.41% and 2.23% respectively throughout the month.

Final asset flow figures for September showed that hedge fund managers recorded performance-based losses totalling US$7.7 billion on top of net investor outflows of US$3.0 billion throughout the month. Preliminary data for October estimates that the global hedge fund industry witnessed US$11.2 billion of performance-driven gains combined with US$15.1 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2440.2 billion as of October 2021. The global hedge funds industry has seen US$100.9 billion of performance-based gains and US$90.7 billion of investor allocations throughout in 2021.

Figure 1a: Summary monthly asset flow data since January 2015

Key highlights for November 2021:

  • Hedge fund managers returned 1.51% in October, underperforming the global equity market as represented by the MSCI ACWI (Local) which returned 4.61% during the month. In terms of 2021 performance, global hedge funds were up 9.18%, with more than a third of the constituents of the Eurekahedge Hedge Fund Index generating double-digit returns in 2021.
  • On an asset-weighted basis, hedge funds returned 0.94% in October, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is up 4.22%, with its underlying strategic mandate CTA/managed futures posting the best performance with 8.28% over the same period.
  • The Eurekahedge North American Hedge Fund Index returned 2.36% in October, thanks to the strong corporate earnings and dovish stance of the Fed on their rate hike which boosted the performance of US equities. On a year-to-date basis, North American managers were up 13.78%, outperforming their European and Asia ex Japan peers who returned 8.48% and 7.61% over the first 10 months of the year.
  • The Eurekahedge Indian Hedge Fund Index was down 0.14% in October, underperforming their Greater China peers which were up 2.70% over the same month. In terms of year-to-date return, Indian hedge fund managers gained 25.97% over the first 10 months, outperforming broader Asia ex-Japan and Greater China peers which posted 8.48% and 2.48% respectively. The improving consumer confidence in India on top of recovery from the COVID-19 pandemic has turned foreign investors into net buyers into the region’s equity market.
  • The Eurekahedge CTA/Managed Futures Hedge Fund Index gained 2.41% in October, outshining their strategic peers over the month. Fund managers benefitted from the sharp increase in oil prices, supported by the refusal of OPEC+ to increase production. In terms of year-to-date return, CTA/managed futures hedge funds were up 8.43%, with more than 40% of the mandate gaining a double-digit return over the year.
  • Structured credit fund managers maintained their winning edge as they returned 0.72% in October, recording their 19th consecutive month of positive performance. On a year-to-date basis, the Eurekahedge Structured Credit Hedge Fund Index was up 9.14% over the first 10 months of the year, while their accumulated return since end-March 2020 rose to 36.86%.
  • Fund managers focusing on cryptocurrencies returned 26.65% in October as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, supported by the performance of Bitcoin which returned 48.93% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 179.32%, outperforming Bitcoin which returned 115.04% over the first 10 months of the year.

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1Based on 61.00% of funds which have reported October 2021 returns as at 15 November 2021