The Eurekahedge Hedge Fund Index was down 0.76%1 in September 2020, outperforming the global equity market as represented by the MSCI ACWI (Local), which lost 2.71% over the same period. Global equities ended their five-month rally over mounting concerns around Covid-19 cases globally which threaten to stall economic recovery given how ‘lockdowns’ continue to be the only modus operandi for governments in the absence of a vaccine. Markets are also beginning to worry over the limits of central bank monetary easing which has resulted in stretched valuations and limited real recovery on the main street, all this at a time when the second wave of Covid-19 is making landfall. In the US a consensus around fiscal policy easing is nowhere to be seen until the elections are over. The tech-heavy NASDAQ and S&P 500 were down 5.16% and 4.10% during the month respectively. In the UK, the passage of the controversial post-Brexit bill in the House of Common, which could breach parts of the terms of the EU withdrawal agreement resulted in the weak performance of the British Pound, which was down 3.37%, while the FTSE 100 retreated 1.63% in September. Returns were mostly negative across geographic mandates in September. Fund managers focusing in Europe were largely flat, outperforming their North American and Asia ex-Japan peers who were down 0.41% and 0.11%, respectively. Across strategies, event driven, distressed debt and arbitrage fund managers were up 0.82%, 0.55% and 0.24% respectively throughout the month.
Final asset flow figures for August showed that hedge fund managers recorded performance-based gains totalling US$24.2 billion and net investor allocations of US$2.2 billion throughout the month. Preliminary data for September estimates that the global hedge fund industry witnessed US$14.4 billion of performance-driven losses combined with US$17.0 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,158.8 billion as of end-September 2020. The global hedge funds industry has seen US$55.4 billion of performance-based decline and US$88.6 billion of investor redemptions over the first three quarters of 2020.
Figure 1a: Summary monthly asset flow data since January 2013
Key highlights for September 2020:
- Global hedge funds were down 0.76% in September and up 3.86% in Q3 2020. In terms of year-to-date returns, the Eurekahedge Hedge Fund Index was up 3.22%, outperforming the MSCI ACWI (Local) by 4.24%. Around 60% of the Eurekahedge Hedge Fund Index’s constituents have outperformed the global equity market in 2020.
- Assets under management for the global hedge funds industry have rebounded increasing by US$120.0 billion over the six-month period ending September 2020. This has come from performance-driven gains of US$122.8 billion partially offset by net investor outflows of US$2.8 billion. This marks a sharp recovery following US$264.1 billion asset decline in Q1 2020.
- The Eurekahedge North American Hedge Fund Index was up 0.69% during the month, outperforming the S&P 500 which was down 4.10%. In terms of year-to-date performance, North American hedge funds were up 3.74% over the first three quarters of 2020, outperforming their European counterparts who were down 1.48% over the same period.
- The Eurekahedge Greater China Hedge Fund Index was down 1.59% in September, outperforming the Hang Seng and Shenzhen Composite by 5.23% and 4.77% respectively. Greater China hedge funds gained 9.29% return in Q3, bringing their cumulative return since end-March to 27.38%.
- The Eurekahedge Long Short Equities Market Hedge Fund Index was down 0.77% in September, bringing its year-to-date return to 4.56%. In the third quarter of 2020, long/short equities hedge funds gained 5.49%, benefitting from the strong performance of the global equity market, which brings their cumulative return since end-March to 18.34%. Around 30% of its total constituents have generated a double-digit return over the first three quarters of 2020.
- The Eurekahedge Emerging Market Hedge Fund Index was down 1.50% in September, bringing its YTD return to 5.56%. In terms of Q3 performance, emerging market mandated funds were up 4.68%, outperforming their developed market mandated funds in North America and Europe who returned 4.60% and 3.06% over the same period respectively
- Hedge funds utilising structured credit strategies were up 1.14% during the month, extending their 6-month trailing return to 17.39% since end-March as captured by the Eurekahedge Structured Credit Hedge Fund Index. The accommodative monetary policy of the Federal Reserve and renew concerned surrounding the increasing COVID-19 cases, resulted in lower yields that supported the performance of the fund managers
- Fund managers focusing on cryptocurrencies were down 12.57% over the month, bringing their year-to-date return to 63.06%. In terms of Q3 performance, the Eurekahedge Crypto-Currency Hedge Fund Index was up 31.37% compared to 17.08% of Bitcoin.
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