Introduction
The Eurekahedge Hedge Fund Index declined 0.48% in October1 outperforming underlying markets as represented by the MSCI World Index2 which was down 1.38% over the same period. Among regional mandates, Latin American managers led the table, up 4.07% during the month followed by Japan managers who gained 2.28%. Across strategies, distressed debt hedge funds led the table with gains of 1.96% followed by fixed income hedge funds which were up 0.51%.
Final asset flow figures for September revealed that managers reported performance-based gains of US$5.2 billion while recording net asset outflows of US$8.3 billion. Preliminary data for October shows that managers have posted performance-based losses of US$3.0 billion while recording net outflows of US$8.4 billion, bringing the current assets under management (AUM) of the global hedge fund industry to a total of US$2.25 trillion.
Figure 1a: Summary monthly asset flow data since January 2012
Key highlights for October 2016:
- Hedge funds were up 2.85% for the year, on track for a better showing compared to 2015 when the average fund realised modest gains of 1.65%. Asset growth for the industry remains muted in 2016, expanding by US$1.7 billion, a sharp detraction from the US$102.5 billion growth seen in 2015.
- While hedge fund capital allocations are in the red for 2016 with outflows of US$16.6 billion for the year, investor subscriptions have favoured CTA/managed futures, multi-strategy and relative value strategies which have seen inflows of US$12.2 billion, US$5.4 billion and US$4.0 billion respectively.
- Hedge funds managing in excess of US$1 billion have seen their asset base decline by close to 2% over the year, with redemptions of US$27.0 billion while performance-based gains stood at US$7.3 billion. In contrast, sub-billion dollar funds have fared relatively better with inflows of US$10.4 billion and performance-based gains of US$11.0 billion.
- Asset base for the US$1.49 trillion North American hedge fund industry grew by US$12.1 billion over the year with most of this growth attributed to performance-based gains (US$18.6 billion year-to-date) while redemptions totalling US$6.5 billion were recorded over the same period.
- The US$524.5 billion European hedge fund industry has seen its asset base contract by US$10.7 billion year-to-date, with managers seeing strong investor redemptions totalling US$7.4 billion over the 10 months. The Eurekahedge European Hedge Fund Index lost 0.65% year-to-date.
- Net flows for Asia ex-Japan mandated hedge funds went in the red for the year following steep redemptions worth US$2.1 billion in October – the highest monthly redemption on record since July 2012. Overall asset growth for Asian mandates is in the red for the year following disappointing returns from Japan (down 0.92%) and Greater China (down 2.15%).
- Among emerging mandates, Latin American long/short equities hedge funds have posted the lowest volatilities levels over the three and five year period compared to regional peers in India and China. More details in Eurekahedge’s 2016 Overview: Key Trends in Latin American Hedge Funds report.
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