Asset Flows Update

The Eurekahedge Hedge Fund Index declined 1.35%1 in March, supported by the robust performance of the S&P 500 which returned 3.58% over the same period. Following Russia’s invasion of Ukraine on 24 February, the US and their allies imposed severe economic sanctions to punish Russia for starting the war and cripple the Russian economy, causing global equity markets to plummet over the first half of March as concerns grew over stagflation at a time when the US Federal Reserve is shifting to a more hawkish monetary policy stance in a bid to curb record levels of inflation. The US consumer price index surged 8.5% in March from 12 months earlier, recording the largest year-over-year increase since December 1981. In a bid to quell rising inflation, the Federal Reserve raised interest rates by 25 basis points for the first time in March, with the potential for six more rate hikes later this year. The US government has also announced plans to release over 180 million barrels of its Strategic Petroleum Reserves over the next six months to help reduce oil prices and fight inflation. Meanwhile, the US 10-year treasury yield rose 52 bp to 2.35%, the highest level since April 2019. Russia and Ukraine have since conducted several rounds of peace negotiations which have been unsuccessful thus far but gives hope that Putin will finally seek a negotiated end to his invasion. Over in Europe, returns were mixed among equity benchmarks in the region with the Euro Stoxx 50 down -0.55% while the RTS Stock Index gained 9.00% after Russia implemented draconian capital controls to crimp the flow of funds out of Russia and raise interest rates to 20 per cent, which together helped to stabilise the value of the rouble. Returns were mixed across geographic mandates in March, with the Latin American mandate taking the lead with a return of 3.59% while the Asia ex-Japan mandate trailed behind their peers with a return of -1.40%. Across strategies, the CTA/Managed Futures mandate performed the best with a return of 4.59% while the arbitrage mandate trailed behind their peers with a return of -1.16%.

Final asset flow figures for February showed that hedge fund managers recorded performance-based losses totalling US$8.4 billion on top of net investor redemptions of US$4.4 billion throughout the month. Preliminary data for March estimates that the global hedge fund industry witnessed US$19.0 billion of performance-driven gains partially offset by US$2.6 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2420.0 billion as of March 2022. The global hedge funds industry has seen US$10.8 billion of performance-based decline and US$18.3 billion of investor redemptions throughout 2022.

Summary monthly asset flow data since January 2013

Key highlights for March 2022:

  • Hedge fund managers were up 1.35% in March, trailing behind to the S&P 500 which was up 3.58% over the month. Around 61% of global hedge funds have posted positive returns in March and 46.0% of them have maintained positive performance over the first quarter of the year.
  • On an asset-weighted basis, hedge funds were up 1.37% in March, as captured by the Eurekahedge Asset Weighted Index – USD. Billion dollar hedge funds were up 1.45% over the month, erasing the losses they incurred in the two previous months, compared to the 1.23% and 0.86% returns of their small and medium size counterparts respectively. On a year-to-date basis, billion dollar hedge funds were up 0.81% on average, outperforming their medium and small sized peers by 2.10% and 1.67% respectively over the first quarter of the year.
  • The Eurekahedge European Hedge Fund Index was up 0.29% in March, outperforming the DAX index which was down -0.32%. European equities have posted limited upside compared to their US counterparts, driven by the hawkish European Central Bank. In the same vein, although Ukraine and Russia were in peace negotiations, uncertainties about the said event posed downside risks to the region’s equity market. In terms of year-to-date return, European hedge funds were down -3.39%.
  • Eurekahedge North American Hedge Fund Index was up 1.09% in March, thanks to the positive performance of US equities with the S&P 500 up 3.58% over the same month. US equities shrugged off the threat of higher inflation and interest rates and inched higher during the month, supported by strong corporate earnings and easing tensions in Eastern Europe. On a year-to-date basis, North American hedge funds were down -1.73% in the first quarter of 2022.
  • The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 4.59% in March, recording its strongest monthly performance since 2007. Fund managers benefitted from higher commodity prices particularly oil, which could be exacerbated further by a potential banning of Russian oil by European countries. In terms of year-to-date performance, CTA/managed futures managers were up 6.84%, posting their best quarterly performance since 2008.
  • The Eurekahedge Greater China Hedge Fund Index was down 4.96% in March, outperforming the underlying equity market in the region by 3.67% and 1.11% as represented by the Shenzhen and Shanghai Composite respectively during the month. Greater China hedge funds recorded their eighth month of losses over the last nine months as the slowing growth in China and delisting of Chinese companies in the US have resulted in a weak performance in the region’s equity market. The Hang Seng was down 5.99% in 2022 and ended the month of March trading at its 68th month low
  • The Eurekahedge Eastern Europe & Russia Hedge Fund Index was down 19.98% as of February 2022, outperforming the underlying equity market in the region as represented by the STOXX Eastern Europe 50 by 9.13%. Fund managers recorded heavy losses owing to the massive selling of risk assets throughout the month. On a year-to-date basis, Eastern Europe and Russian hedge funds were down -24.09%, outperforming the Stoxx Eastern Europe 50 which declined -30.21%.
  • Fund managers focusing on cryptocurrencies gained 6.91% in March, bringing their Q1 return to -10.61% as represented by the Eurekahedge Crypto-Currency Hedge Fund Index. Cryptocurrencies posted a strong recovery during the month as Bitcoin was up 24.82% in March, erasing its losses posted in January and February.

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1Based on 58.01% of funds which have reported March 2022 returns as at 20 April 2022