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Index Flash Update - 13 October 2021

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Hedge funds down 0.33% in September as rising inflation and hawkish central bank communications dampened investor risk-on sentiment

The Eurekahedge Hedge Fund Index was down 0.33% in September 2021, outperforming the global equity market as represented by the MSCI ACWI (Local) which returned -3.55% over the same period. Concerns over rising inflation continue to weigh on markets with the Federal Reserve raising its inflation forecast of the year to 4.2%, up from the previous estimate of 3.4%, driven by supply chain bottlenecks and the developing energy crisis in Europe and China which has pushed energy prices up by 11.60% in September. Compounding matters further, the OPEC+ decided to keep the supplies of oil tight leading to a surge in oil prices, with Brent crude oil and West Texas Intermediate crude oil up 9.52% and 9.91% in September respectively. In addition, the Federal Reserve announced that the tapering of quantitative easing would likely begin in November 2021 and finish by mid-2022, bringing an end to their bond buying programme. Against this backdrop, the 10-year US Treasury gained 19bp, the most since March 2021. The heightened risk aversion led to sharp declines in major US equity indices, with the NASDAQ, S&P500 and DJIA down 5.31%, 4.76% and 4.29% respectively. Over in Europe, returns were negative among equity benchmarks in the region with the DAX, Euro Stoxx 50 and CAC 40 down 3.63%, 3.53% and 2.40% respectively. The ongoing energy crisis as well as the political uncertainty post-Germany elections dampened market risk-on sentiment. Despite the challenges in Europe, the European Central Bank revised economic projections upward and aimed for a moderately lower pace of net asset purchases under the pandemic emergency purchase programme in the fourth quarter. Returns were mixed across geographic mandates in September with Japanese hedge funds leading the group with a return of 2.76% while Emerging Markets and Latin American hedge funds trailed behind their regional peers with returns of -0.68% and -1.79% respectively. Across strategies, distressed debt, arbitrage and event driven outperformed their strategic peers with returns of 1.02%, 0.56% and 0.54% respectively throughout the month.

Below are the key highlights for the month of September 2021
  • Hedge fund managers returned -0.33% in September, outperforming the global equity market as represented by the MSCI ACWI (Local) which returned -3.55% during the month. In terms of 2021 performance, global hedge funds were up 8.27%, recording the strongest September year-to-date return since 2009 despite the ongoing pandemic. Around 76.7% of the constituents of the Eurekahedge Hedge Fund Index generated positive returns in 2021.

  • On an asset-weighted basis, hedge funds returned -0.93% in September, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is only up 3.04%, highlighting the struggles for some of the larger asset managers over the year.

  • The Eurekahedge North American Hedge Fund Index returned -0.15% in September, outperforming the S&P 500 and DJIA which returned -4.76% and -4.29% respectively. American stock markets came under pressure after the Fed stated that the tapering of quantitative easing would likely begin in November 2021 and will finish by mid-2022. On a year-to-date basis, North American fund managers were up 11.71%, recording their best September YTD performance since 2009.

  • The Eurekahedge European Hedge Fund Index returned -0.05% in September, outperforming the pan-European Euro Stoxx 50 which returned -3.53%. Market risk sentiment was dampened due to the developing energy crisis in Europe and the heightened political uncertainty post-Germany elections. On a year-to-date basis, European fund managers were up 7.71%, recording their best September YTD performance since 2009.

  • The Eurekahedge Distressed Debt Hedge Fund Index gained 1.02% in September, extending their streak of consecutive positive monthly returns to twelve months. On a year-to-date basis, distressed debt hedge funds outperformed all of their main strategic peers and were up 13.14%, recording their best September YTD performance since 2009.

  • The Eurekahedge Commodity Hedge Fund Index gained 2.81% in September, supported by the strong return of the S&P GSCI Index which returned 6.03%. Energy was the best performing component in September, posting a return of 11.60% as Brent Crude Oil and West Texas Intermediate Crude Oil surged 9.52% and 9.91% respectively after OPEC+ decided to keep supplies tight despite the ongoing global energy crunch. On a year-to-date basis, commodity hedge funds were up 12.85%, recording their best September YTD performance since 2006.

  • Fund managers focusing on cryptocurrencies returned -9.05% in September as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index , outperforming Bitcoin which returned -11.61% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 119.84%, outperforming Bitcoin which returned 44.39% over the first nine months of the year.

 

Index of the Month Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Commodity Hedge Fund Index 2.81 12.85 11.19

Main Indices

Main Eurekahedge Indices Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Hedge Fund Index -0.33 8.27 12.82
Eurekahedge Fund of Funds Index -0.29 7.00 11.74
Eurekahedge Long-only Absolute Return Fund Index -1.54 11.72 12.80

Regional Indices

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Eurekahedge Regional Indices Sep
2021*
2021 Returns 2020 Returns
Eurekahedge North American Hedge Fund Index -0.15 11.71 15.40
Eurekahedge European Hedge Fund Index -0.05 7.71 4.64
Eurekahedge Eastern Europe & Russia Hedge Fund Index 0.74 12.83 -2.59
Eurekahedge Japan Hedge Fund Index 2.76 10.25 1.61
Eurekahedge Emerging Markets Hedge Fund Index -0.68 4.05 16.75
Eurekahedge Asia ex Japan Hedge Fund Index -0.27 6.49 22.79
Eurekahedge Latin American Hedge Fund Index -1.79 -0.50 4.06

Japanese hedge fund managers posted the highest return of 2.76% in September, outperforming their North American and European counterparts who returned -0.15% and -0.05% respectively. The robust performance of the Nikkei 225 which returned 4.85% supported the performance of Japanese hedge funds. On the other end of the spectrum, Latin American hedge funds posted the lowest return of -1.79% in September as returns were negatively affected by the poor equity market performance in the region, as seen in the -6.48% return of the MSCI EM Latin America Index IMI.

Strategy Indices

Returns were mixed across strategic mandates in September with the distressed debt, arbitrage and event driven mandates gaining 1.02%, 0.56% and 0.54% respectively, extending their year-to-date returns to 13.14%, 3.49% and 11.47% respectively. On the other end of the spectrum, the relative value and long short equities mandates returned -0.68% and -0.61% respectively, bringing their year-to-date returns down to 6.01% and 9.93% respectively.

 

Table 1: Strategy return map

Eurekahedge Strategy Indices Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Arbitrage Hedge Fund Index 0.56 3.49 11.69
Eurekahedge CTA/Managed Futures Hedge Fund Index 0.01 6.30 7.46
Eurekahedge Distressed Debt Hedge Fund Index 1.02 13.14 6.76
Eurekahedge Event Driven Hedge Fund Index 0.54 11.47 8.73
Eurekahedge Fixed Income Hedge Fund Index -0.12 4.39 5.20
Eurekahedge Long Short Equities Hedge Fund Index -0.61 9.93 17.86
Eurekahedge Macro Hedge Fund Index -0.23 3.67 11.67
Eurekahedge Multi-Strategy Hedge Fund Index -0.38 6.39 7.93
Eurekahedge Relative Value Hedge Fund Index -0.68 6.01 9.47
CBOE Eurekahedge Long Volatility Hedge Fund Index 0.88 -7.12 25.41
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index -1.83 0.09 5.66
CBOE Eurekahedge Short Volatility Hedge Fund Index -1.88 8.57 -0.80
CBOE Eurekahedge Tail Risk Hedge Fund Index 0.38 -7.22 34.84
Eurekahedge Equity Long Bias Hedge Fund Index -1.85 10.93 14.79
Eurekahedge Equity Market Neutral Hedge Fund Index 0.40 6.45 3.69
Eurekahedge Trend Following Index 0.02 8.62 11.29
Eurekahedge FX Hedge Fund Index 4.90 8.56 0.95
Eurekahedge Commodity Hedge Fund Index 2.81 12.85 11.19
Eurekahedge Crypto-Currency Hedge Fund Index -9.05 119.84 200.17
Eurekahedge AI Hedge Fund Index -2.75 -1.46 11.24
Eurekahedge ILS Advisers Index -0.24 0.49 3.48
Eurekahedge Global Hedge Fund Indices by Fund Size Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) -0.73 7.96 13.34
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 0.26 8.60 11.69
Eurekahedge Large Hedge Fund Index (> US$500m) -0.23 7.44 7.15
Eurekahedge Billion Dollar Hedge Fund Index -0.29 6.24 5.20
Eurekahedge Asset Weighted Indices Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Asset Weighted Index – USD -0.93 3.04 4.47
Eurekahedge TOP100 Asset Weighted Index – USD -0.94 1.84 1.71
Eurekahedge TOP300 Asset Weighted Index - USD -0.87 2.60 3.12
Asia-Eurekahedge Indices Sep
2021*
2021 Returns 2020 Returns
Eurekahedge Greater China Hedge Fund Index -0.04 1.65 35.35
Eurekahedge India Hedge Fund Index 1.93 24.74 19.88


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