Hedge funds attract over US$30 billion in the first quarter
Hedge funds sealed the first quarter of the year with another month of negative returns, down 0.18%1 in March as managers navigated through a choppy start to the year. However, strong returns posted by fund managers in the previous month saw them through with the Eurekahedge Hedge Fund Index up 1.05% in Q1 2014, outperforming the MSCI World Index which has gained 0.67% over the same period.
Key takeaways for the month of March 2014:
Global hedge funds were up 1.05% in Q1 2014, with North American and European fund managers leading the tables with returns of 2.50% and 1.63% respectively.
Net asset flows for Q1 2014 stood at US$32.6 billion, with capital allocations to North American managers at US$ 17.7 billion and those for European managers at US$ 13.6 billion.
Japan focused hedge funds posted their third consecutive month of negative returns - down 0.84% in March and 2.09% in the first quarter of the year.
Latin America focused managers surpassed all regional mandates delivering the strongest gains – up 1.53% in March, and outperforming the MSCI EM Latin America Index2 by 2.45% in Q1 2014.
Distressed debt investing hedge funds delivered their ninth consecutive month of positive returns – up 2.70% in the first quarter of the year.
CTA/managed futures hedge funds continued to languish, down 0.98% in March and 0.33% in Q1 2014. Investors have redeemed US$5.0 billion from the strategy in the first quarter of the year.
Eastern Europe & Russia focused hedge funds fared the worst, losing 2.54% in March and 8.02% in Q1 2014, weighed down by geopolitical tensions in the region.
Main Eurekahedge Indices
Long-Only Absolute Return Fund Index
Eurekahedge Regional Indices
Eastern Europe & Russia
Global markets remained largely flat-to-negative during the month as better-than-expected US jobs data and the reduction of the Fed’s monthly asset purchase program by another US$10 billion heightened concerns that US interest rates could rise faster than previously anticipated. However, investor sentiment improved towards the month end as Fed chairperson Janet Yellen shifted the focus of her ‘forward guidance’ away from an unemployment target towards a more qualitative improvement in the US labour market – a move that will give the Fed more flexibility to influence rates until a sound economic recovery is ensured. Meanwhile, European markets trended downwards as fears over disinflation re-surfaced in the Eurozone, while in Asia, markets declined on news of disappointing PMI data from China and an impending sales tax hike in Japan. Emerging economies continued to show signs of stability with the MSCI Emerging Market Index3 advancing 1.69% during the month as major emerging market currencies stabilised.
Most regional mandates ended the month in negative territory with Eastern Europe & Russia investing hedge funds seeing the strongest decline - down 2.54% as tensions between Russia and the West weighed on market sentiment. The Eurekahedge Japan Hedge Fund Index dropped 0.84%, with long/short equities managers in the region posting losses as the Tokyo Topix declined 0.72% during the month on the back of an appreciating yen. Asia ex-Japan investing hedge funds were down 0.24%, with managers focused on the Greater China region posting strong losses, declining by 3.47%. European managers were also in the red, down 0.34%, though managing to outperform underlying markets as the MSCI Europe Index declined 0.98% during the month. North American managers posted gains of 0.45% and outperformed the MSCI North America Index4 which was up 0.38% during the month. The Eurekahedge Latin America Hedge Fund Index posted the strongest gains, up 1.53% as Brazil’s Ibovespa climbing 7.13% in March on the prospects of a more pro-market economic policy taking shape in the country. Emerging market focused hedge funds also ended the month in positive territory, up 0.67%.
Returns across investment strategies were mixed with relative value, multi-strategy and fixed income hedge funds delivering the best returns, gaining 0.85%, 0.52% and 0.39% respectively. Distressed debt investing funds posted their ninth consecutive month of positive returns – up 0.25%, narrowly outperforming the BoFA Merrill Lynch US High Yield Index5 which rose 0.23% in March. Macro focused funds were up 0.20%, followed by arbitrage strategies which ended the period almost flat, only eking out a 0.07% gain. CTA/managed futures funds were the worst performers during the month, declining 0.98% in March with managers reporting losses on their long positions in precious metals. Long/short equities focused hedge funds posted a decline of 0.12%, while event-driven fund managers registered their first month of negative returns since June 2013, finishing the month down 0.56%.
Eurekahedge Strategy Indices
Eurekahedge Global Hedge Fund Indices by Fund Size
Small (< US$100m)
(US$100m - US$500m)
Large (> US$500m)
Mizuho-Eurekahedge Index - USD
TOP 100 Index - USD
TOP 300 Index - USD
* Based on29.00% of funds which have reported March 2014 returns as at 08 April 2014
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1 Based on 29.00% of funds which have reported March 2014 returns as at 8 April 2014 2MSCI AC World Index (Local) 3MSCI Emerging Market Latin America Index (IMI- Local) 4MSCI Emerging Market Index (IMI- Local) 5MSCI AC North America Index (Local) 6Bank of America Merrill Lynch US High Yield Index (H0A0 Index- Local)