News & Events

Asset Flows Update

The Eurekahedge Hedge Fund Index was up 2.99%1 in February 2021, outperforming the global equity market as represented by the MSCI ACWI which gained 2.72% over the same period. The global equity markets rallied strongly in the first two weeks of February, supported by strong corporate earnings and the increased likelihood that Biden’s new US$1.9 trillion economic stimulus package will be approved by Congress even in the absence of Republican support. In addition, the continued speedy rollout of vaccines across the United States led to optimism that a greater relaxation of virus control measures will be possible and allow the economy to return to normalcy sooner. These factors led to a sharp increase in inflation expectations and a significant rise in the yield of global longer tenor bonds.  The UK 10-year bond yield and 10-year US treasury note were up 49bp and 34 bp in February respectively, negatively impacting sentiment towards equities and equities sold off in the final week of the month. Technology stocks which are more sensitive to rate changes suffered a disproportionately larger impact, with the NASDAQ Composite declining 6.41% from its peak of 14,095.47 on 12 February 2021 to end the month at 13,192.35. In contrast, the DJIA recorded a smaller drop, losing 3.2% from its peak and ending February 2021 at 30,932.37. Nevertheless, both indices managed to generate positive returns in February, with the DJIA returning 3.17% for the month while the NASDAQ Composite returned 0.93%. Over in Europe, returns were positive among equity benchmarks in the region with the CAC 40 and Euro Stoxx 50 taking the lead with gains of 5.63% and 4.45% respectively. Returns were mixed across geographic mandates in February with North American and European hedge funds gaining 3.90% and 2.55% respectively while Latin American hedge funds were down 0.68%. Across strategies, CTA/managed futures and long/short equities outperformed their strategic peers with returns of 3.95% and 3.92% respectively throughout the month. Managers utilising CTA/managed futures strategies benefitted from the strong rise in commodity prices, driven largely by the surge in prices of Brent Crude Oil and West Texas Intermediate Crude oil of 20.06% and 20.28% respectively in February as Saudi Arabia volunteered to cut output beyond levels previously negotiated with OPEC.

Final asset flow figures for January showed that hedge fund managers recorded performance-based losses totalling US$5.6 billion and net investor allocations of US$1.0 billion throughout the month. Preliminary data for February estimates that the global hedge fund industry witnessed US$23.2 billion of performance-driven gains combined with US$9.8 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2277.0 billion as of February 2021. The global hedge funds industry has seen US$17.7 billion of performance-based gains and US$10.8 billion of investor allocations throughout in 2021.

Figure 1a: Summary monthly asset flow data since January 2013

Key highlights for February 2021:

  • Hedge fund managers were up 2.99% in February – recording their third consecutive month of outperformance against the global equity market as represented by the MSCI ACWI which returned 2.72% over the month. In terms of performance distribution, the top 10% of global hedge funds generated an average return of 11.45% over the first two months of the year, while the bottom 10% declined by 2.68%. In the same vein, more than 70% of the global hedge funds tracked by the Eurekahedge database generated a positive return in 2021.
  • On an asset-weighted basis, hedge funds were up 1.54% in February, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is only up 1.21%, highlighting the struggles for some of the larger asset managers as seen in the performance decline of billion-dollar hedge funds in Table 2.
  • North American hedge funds gained 3.90% in February, outperforming their European and Asia ex-Japan peers who returned 2.55% and 1.29% over the same month, respectively. The underlying long/short equities mandate of the region was the primary contributor to the index’s performance as they returned 5.37% over the month as represented by the Eurekahedge North American Long Short Equities Hedge Fund Index. In terms of year-to-date return, North American hedge funds also have the best performance as they were up 4.98% over the first two months, compared to 4.02% and 2.63% of Asia ex-Japan and European hedge funds.
  • The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 3.95% in February, recording its best monthly performance since the aftermath of the 2008 global financial crisis. Fund managers with exposure to the energy sector were the primary performance driver to the index, supported by the decision of OPEC and its allied members to cut their oil production which resulted in a sharp increase in oil prices over the month. On a year-to-date basis, the CTA/managed futures managers were up 3.42%, with the top 10% gaining 10.63% on average.
  • Hedge funds utilising AI strategies were down 0.09% in February, underperforming most of their strategic peers. In terms of year-to-date return, AI hedge funds also lagged the group as they were down 2.52% compared to the 6.69% return of their long-bias sub-strategic peers.
  • Structured credit hedge funds were one of the most consistent strategic mandates since the market breakdown in March 2020, as they gained 1.06% in February and recorded their 11th consecutive month of positive performance. In terms of year-to-date return, the Eurekahedge Structured Credit Hedge Fund Index was up 2.87% as of February 2021.
  • Fund managers focusing on cryptocurrencies were up 34.98% in February as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index – posting their highest monthly performance since May 2019. On a year-to-date basis, cryptocurrency hedge funds are having their best start of the year as they generated 74.88% return in the first two months of 2021, thanks to the strong rally of Bitcoin which just recently broke the US$60,000 level.

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1Based on 46.73% of funds which have reported February 2021 returns as at 12 March 2021