Investor flows into hedge funds cross US$50 billion mark
Hedge funds posted their second consecutive month of negative returns in April with the Eurekahedge Hedge Fund Index down 0.15%1 as global markets continued to falter amid a sluggish start to the year. On a year-to-date basis, hedge funds are up 0.78%, slightly ahead of the MSCI World Index which has returned 0.75%2 in the first four months of the year. The larger hedge funds delivered better returns than their smaller peers during the month, with the asset weighted Mizuho-Eurekahedge Index outperforming the Eurekahedge Hedge Fund Index by 0.40%.
Key takeaways for the month of April 2014:
Global hedge funds were up 0.78% year-to-date as North American, European and Latin American managers lead with gains of 2.16%, 1.03% and 0.38% respectively.
The Top 100 best performing hedge funds during the month posted average returns of 4.21%, with long/short equities and CTA/managed futures constituting 72% of these funds.
Net asset flows as at April 2014 year-to-date crossed the US$50 billion mark, with capital allocations to North American managers at US$24.8 billion and those to European managers at US$25.1 billion.
Japanese hedge funds were down for the fourth consecutive month although they have outperformed the Nikkei 225 Index by more than 10% year-to-date, a significant outperformance.
Latin America focused managers surpassed all regional mandates delivering the strongest gains – up 0.77% in April, outperforming the MSCI EM Latin America Index3 by 1.51% on a year-to-date basis.
Distressed debt, fixed income and arbitrage strategies lead the tables delivering returns of 2.98%, 2.60% and 1.61% respectively.
Main Eurekahedge Indices
Long-Only Absolute Return Fund Index
Eurekahedge Regional Indices
Eastern Europe & Russia
Global markets produced mixed results during the month, largely remaining in headline-following mode as new macroeconomic data validated concerns regarding a slow start to the year. In the US, the Fed kept its QE scale back on track despite disappointing first quarter GDP growth figures, although markets took some stock in the improving household expenditure numbers – a key constituent of the US growth narrative. The Eurozone continued to post a recovery in economic activity, but a strengthening euro and below expectation inflation data remained a source of worry. ECB President Mario Draghi seems more comfortable in deploying forward guidance and the promise of keeping interest rates low for an extended period; as opposed to pulling the trigger on quantitative easing to appease market expectations in the region. In Asia, markets edged downwards on a slowing growth rate in China and doubts about the longevity of Abenomics, though emerging economies in the region held their ground despite the Fed's QE taper.
Returns across regional mandates were mixed, with North American managers delivering their third consecutive month of positive returns gaining 0.12%. On a year-to-date basis, the Eurekahedge North American Hedge Fund Index is up 2.16%, outperforming the MSCI North America Index which has returned 1.66% over the same period. Latin America focused hedge funds posted the strongest gains among all regional mandates, up 0.77% as the Ibovespa rallied 2.33% during the month. Emerging markets focused hedge funds were up 0.15%, outperforming the MSCI Emerging Market Index which lost 0.44% at the end of the month, with a number of fund managers reporting gains from their exposure to Turkey - which posted healthy growth figures. Fund managers focused on Europe were down 0.59% as the region's long/short equities funds posted losses on the back of disappointing Q1 2014 corporate earnings data. Asia ex-Japan mandated funds were down 0.70%, with managers investing in Greater China posting another month of disappointing losses of 2.27%. Fund managers investing with a dedicated Japan mandate posted their fourth month of negative returns, losing 0.38% and 2.15% year-to-date as fund managers have struggled amid an appreciating yen – which has driven up demand for the currency denting exports and suppressing price level growth. It is however pertinent to note that Japan mandated hedge funds have outperformed underlying markets by over 10% as the Nikkei has slipped 12.20% in the first four months of the year.
Fixed income hedge funds led the tables in April, delivering gains of 0.69% as increased demand for bonds saw long term US interest rates decline by six basis points during the month. Multi-strategy and arbitrage funds were up 0.57% and 0.51% respectively while CTA/managed futures hedge funds delivered gains of 0.38%, supported by gains in the commodity sector as the S&P Goldman Sachs Commodity Index4 was up 0.74% supported by gains in energy and industrial metals. Long/short equities managers posted declines of 0.86% with managers focused on Europe and Asia delivering steep losses, while their counterparts in North America suffered on their exposure to tech stocks as the NASDAQ declined 2.01% during the month. Macro funds were down 0.45% and are in negative territory on a year-to-date basis posting losses of 1.01%, although fund managers reported gains from their exposure to equities and bonds of the Eurozone periphery where the theme of a visible recovery appears to be gaining momentum. Distressed debt managers were flat-to-negative, and dipped 0.05% though leading the returns tables with gains of 2.98% year-to-date.
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 40.86% of funds which have reported April 2014 returns as at 12 May 2014
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1 Based on 40.86% of funds which have reported April 2014 returns as at 12 May 2014 2MSCI AC World Index (Local) 3 MSCI Emerging Market Latin America Index (IMI- Local) 4S&P Goldman Sachs Commodity Index Total Return