Hedge funds down 0.44%, beat markets by more than 3%
Hedge funds were down 0.44%1 in January, outperforming underlying markets as the MSCI World Index declined 3.74%2 during the month with global markets off to a bumpy start in 2014.
Key takeaways for the month of January 2014:
Hedge funds surpassed the MSCI World Index by over 3% - the largest outperformance of hedge funds in 20 months; almost 90% of fund managers outperformed underlying markets
Developed markets investing hedge funds fared better than those focused on emerging economies, with North American, European and Japanese hedge funds delivering positive returns amid difficult market conditions
Japan focused long/short equities managers gained 0.42% in January and outperformed the Nikkei 225 Index by almost 9% during the month
Greater China hedge funds ended their six month winning streak, with net asset allocations to fund managers at US$1.6 billion for 2013
Latin American focused managers outperformed the MSCI EM Latin America Index3 by 5% during the month
Distressed debt investing hedge funds delivered their seventh consecutive month of positive returns - up 0.69% in January and 15% in the last 12 months
Main Eurekahedge Indices
Long-Only Absolute Return Fund Index
Eurekahedge Regional Indices
Eastern Europe & Russia
Global markets trended downwards during the month led by weak US jobs and discouraging PMI numbers from China. Market sentiment weakened further towards the month-end as the Fed announced another round of QE trimming which catalysed investor flight from emerging economies and led credence to concerns regarding the health of the global economy recovery. Emerging market currencies also came under sharp selling pressure and markets watched anxiously as the global economy transitions to a post-QE world.
Hedge funds focused on developed economies delivered positive returns during the month, led by North American fund managers who were up 0.37% - outperforming the MSCI North America Index4 which declined 3.32% during the month. Japanese fund managers posted their fifth consecutive month of positive returns with the Eurekahedge Japan Hedge Fund Index up 0.31%, outperforming the Nikkei 225 Index which was down 8.45% as the yen strengthened 2.95% against the US dollar during the month. European hedge fund managers were up 0.21% beating underlying markets as the MSCI Europe Index5 was down 2.06% in January. Eastern Europe and Russia focused hedge funds were the worst performers and declined by 4.45%, followed by Latin American and emerging markets focused hedge funds which were down 1.95% and 1.79% respectively. Greater China investing hedge funds ended their six month winning streak reporting losses for the month of January - down 1.29% though outperforming underlying markets as the CSI 300 Index declined 5.48% during the month.
Returns across hedge fund strategies were mixed with fund managers utilising relative value trades delivering the best returns - up 0.83% and benefitting from their market neutral stance as volatility increased during the month. The Eurekahedge Distressed Debt Hedge Fund Index was up 0.69%, underperforming the BoFA Merrill Lynch US High Yield Index6 which gained 0.74% during the month. Fixed income strategies posted gains of 0.21%, with market sentiment reversing from a 'long equities, short bonds' posturing as equity markets saw broad based declines while the interest rate on 10-year US treasury bills declined to 2.67% in the month. Long/short equities funds were down 0.54%, with fund managers exposed to Latin American equity markets posting the largest losses of 3.59%. CTA/managed futures strategy was down 0.84% with fund managers utilising systematic/trend following trades posting losses of 1.47%. Managers investing in commodities were down 0.93% as the S&P Goldman Sachs Commodity Index7 declined 1.64% during the month, with managers reporting losses on their long positions in base metals which edged downwards following disappointing manufacturing data from China.
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 on 35.41% of funds which have reported January 2014 returns as at 11 February 2014
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1 Based on 35.41% of funds which have reported January 2014 returns as at 11 February 2014 2 MSCI AC World Index (USD) 3 MSCI Emerging Market Latin America Index (IMI- Local) 4 MSCI AC North America Index (USD) 5 MSCI AC Europe Index (Local) 6 Bank of America Merrill Lynch US High Yield Index (H0A0 Index- Local) 7 S&P Goldman Sachs Commodity Index Total Return