Asset Flows Update

The Eurekahedge Hedge Fund Index declined -0.72%1 in April, outperforming the S&P 500 which fell -8.80% over the same period. Global equities tumbled in April amid an unprecedented confluence of headwinds stemming from the Russia-Ukraine war, ongoing supply chain disruptions which were exacerbated by the widening COVID-19 lockdowns in China and aggressive tightening of monetary policy by global central banks to combat rising inflation. US inflation rose 8.3% year-on-year in April, dipping slightly from the 8.5% increase in March but nevertheless marks the seventh straight month of increases exceeding 6%. Federal Reserve Chair Jerome Powell acknowledged the pain caused by rising prices and pledged to use all available tools to bring inflation down expeditiously, with a goal of engineering a soft landing that reigns in inflation while avoiding tipping the economy into a recession. To achieve that aim, the Federal Reserve hiked interest rates by 50bps in May, the sharpest increase since 2000 and signalled the possibility of further hikes in the coming months. Over in Europe, returns were mostly negative among equity benchmarks in the region with the Euro Stoxx 50 down -2.55% while the RTS Index gained 5.90%, supported by the strong recovery of the Russian rouble to a more than two-year high of 73.50 against the Euro after capital controls banning short selling and foreign players from selling shares in Russian companies without permission were implemented. Spurred by skyrocketing energy prices following Russia’s invasion of Ukraine, Eurozone inflation hit a record 7.5% in April, more than triple the European Central Bank’s 2% target seen as guaranteeing price stability. With a further acceleration in prices expected in the coming months, ECB president Christine Lagarde has signalled her support for an interest rate increase in July after the conclusion of the ECB’s stimulus programme early in the third quarter of 2022. Returns were negative across geographic mandates in April, with the European mandate performing the best with the smallest decline of -0.46% while the Latin American mandate trailed behind their peers with a return of -4.02%. Across strategies, the CTA/managed futures mandate performed the best with a return of 2.93% while the long/short equities mandate trailed behind their peers with a return of -2.29%.

Final asset flow figures for March showed that hedge fund managers recorded performance-based gains totalling US$29.6 billion and net investor redemptions of US$7.5 billion throughout the month. Preliminary data for April estimates that the global hedge fund industry witnessed US$7.1 billion of performance-driven gains and US$26.7 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2406.0 billion as of April 2022, and the industry has seen US$6.9 billion of performance-based gains and US$50.0 billion of investor redemptions throughout 2022.

Summary monthly asset flow data since January 2013

Key highlights for April 2022:

  • Hedge fund managers were down 0.72% in April, outperforming the tech-heavy NASDAQ and S&P 500 by 12.54% and 8.08% respectively. Around 80.1% of global hedge funds have outperformed the S&P 500, while 44.4% of them have generated positive returns in April. On a year-to-date basis, global hedge funds were down -1.83%, outperforming the S&P 500 which returned -13.31% over the same period.
  • In terms of asset flow, global hedge funds posted net investor redemptions of US$50 billion partially offset by performance-based growth of US$6.9 billion over the first four months of 2022. CTA/managed futures, macro and multi-strategy were the top positive contributors over the period as they reported accumulated performance-based gains of US$61.9 billion as of April 2022, offset by performance-based losses of US$39.4 billion incurred by the long/short equities strategy over the same period.
  • On an asset-weighted basis, hedge funds were down 0.71% in April, as captured by the Eurekahedge Asset Weighted Index – USD, slightly outperforming its equal-weighted counterpart by 0.01%. On a year-to-date basis, the Eurekahedge Asset Weighted Index – USD was down 1.07% over the first four months of the year.
  • The ability of large size hedge funds to diversify their assets have paid off in this challenging period as they have outperformed their smaller peers, with the billion dollar and large-size hedge funds returning 0.18% and -0.07% in April respectively, while their medium and small-size counterparts posted relatively larger losses of -0.92% and -1.04% respectively. In terms of year-to-date returns, the Eurekahedge Billion Dollar Hedge Fund Index was up 0.54%, outperforming their medium and small-size peers which posted losses of -2.08% and -2.26% respectively.
  • Eurekahedge European Hedge Fund Index was down 0.46% in April, outperforming the DAX Index by 1.74% during the month. European equities reported smaller losses compared to their US counterparts, supported by strong corporate earnings in the region and the relatively less hawkish ECB monetary policy stance than was expected by the market. In terms of year-to-date return, European hedge funds were down 4.49% as of April 2022, with around 40% of them maintaining a positive performance over the first four months of the year.
  • The Eurekahedge Multi-Strategy Hedge Fund Index was down 0.61% in April, bringing its year-to-date return to -0.49% over the first four months of 2022. In terms of their asset flow, multi-strategy hedge funds were the most consistent amidst the heightened market volatility as they recorded their fifth consecutive month of performance-based growth. In April, multi-strategy fund managers reported performance-based gains of US$8.0 billion, while accumulating a performance-based growth of US$20.9 billion throughout the year.
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  • The Eurekahedge North American Hedge Fund Index was down 1.74% in April, outperforming the S&P 500 by 7.06% during the month. In a bid to curb rising inflationary pressures, the Federal Reserve has raised their policy rate by 50bps in May and expects to conduct further rate hikes in the coming months, leading to increased bearish sentiment in the region. On a year-to-date basis, North American hedge funds were down -3.27%, with its underlying long/short equities sub-mandate posting -7.02% of losses over the first four months of the year.
  • The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 2.93% in April, posting its fifth consecutive month of positive performance and best 5-month run since 2011, with an accumulated return of 10.17% since end-December 2021. Fund managers benefitted from higher commodity prices particularly in energy and agriculture, driven by supply chain bottlenecks caused by the ongoing geopolitical conflict. On a year-to-date basis, CTA/managed futures managers were up 9.40% over the first four months of 2022, with around a quarter of them generating a return more than 20%.
  • The Eurekahedge Long Short Equities Hedge Fund Index was down -2.29%, bringing its year-to-date return to -5.89% as of April 2022. The hawkish Federal Reserve, higher commodity prices and lockdowns in China have contributed to the weak performance of the global equity markets during the month. Around 38% of long/short equities hedge funds have maintained a positive performance in April, while 10% of them have generated a double-digit return in 2022.
  • Fund managers focusing on cryptocurrencies as represented by the Eurekahedge Crypto-Currency Hedge Fund Index declined 12.87% in April, bringing their year-to-date return to -20.28%. Similar with other risk asset classes, the market turmoil has also impacted the cryptocurrency market. Bitcoin was down -18.01% in April, and as at the time of writing is currently trading below US$30,000, sharply lower than its all-time high of around US$65,000.

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1Based on 51.89% of funds which have reported April 2022 returns as at 17 May 2022