Introduction
The Eurekahedge Hedge Fund Index was up 0.17%1 in August, outperforming the MSCI ACWI (Local) which ended the month down 2.37%. The US administration imposed additional tariffs to the remaining US$300 billion of Chinese imported goods, which resulted in the weakening of the CNY past the symbolic 7 per USD level early into the month. Consequently, the US Treasury Department labelled China as a currency manipulator, further intensifying the trade tension between the two countries. The risk-off sentiment among investors during the month was mostly driven by political concerns encompassing the US-China trade war, the deteriorating bilateral relationship between Japan and South Korea, the ongoing protests in Hong Kong, and the risk of a no-deal Brexit among other things. Further exacerbating the risk-off sentiment during the month, the US 2-10Y yield spread inverted for the first time since 2007, raising concerns over an impending economic recession.
Approximately 51.1% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in August, and 32.6% of the fund managers in the database were able to generate double-digit returns over the first eight months of the year. Returns were negative across regions, with Asia ex-Japan fund managers down 0.96%, owing to the re-escalation of the US-China trade war and the protests in Hong Kong. Fund managers focusing on North America and Europe lost 0.78% and 0.61% respectively as a result of weak equity market performance during the month. Looking at year-to-date performance, Asia ex-Japan hedge funds have returned 6.83%, ahead of their North American peers who were up 6.04% over the first eight months of 2019.
Figure 1: August 2019 and July 2019 returns across regions
Figure 2 illustrates the year-to-date performance of hedge fund managers across regions. Supported by the strong performance of the global equity and bond markets, all regional mandates were up for the year, with Latin American hedge funds leading the pack with their 9.19% return. On the other end, fund managers focusing on Japan have returned 1.33% year-to-date, trailing behind the other regional mandates.
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