The Eurekahedge Hedge Fund Index was down 0.27%1 in July, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 0.40% over the same period. The steady progress of the COVID-19 vaccine rollout in several major developed markets enabled the relaxation of mobility restrictions which provided support to the global economic recovery. However, investor sentiment was dampened by the spread of the highly infectious Delta variant of COVID-19, leading to concerns that the economic momentum would not be sustainable. The Federal Reserve noted that the US economic recovery remains on track but said that tapering would only be considered after substantial improvements to the economy and the labour market has been achieved. Over in China, the Chinese authorities imposed a crackdown on technology and education companies which unsettled investors and led to a sharp decline in Chinese equities in July – the CSI 300 Index and Hang Seng Index posted returns of -7.90% and -9.94% respectively. Nevertheless, strong corporate earnings in the United States have enabled US equities to perform well in July with the S&P 500 and DJIA gaining 2.27% and 1.25% respectively. Over in Europe, returns were mostly positive among equity benchmarks in the region with the CAC 40 and Euro Stoxx 50 taking the lead with gains of 1.61% and 0.62% respectively. The increasing share of people fully vaccinated against COVID-19 boosted hopes that lockdowns would not be necessary despite the rising cases of the Delta variant. Returns were mostly negative across geographic mandates in July with European hedge funds in the lead with a return of 0.61% while North American and Asia ex-Japan hedge funds posted returns of -0.23% and -1.18% respectively. Across strategies, distressed debt and CTA/managed futures hedge funds outperformed their strategic peers with returns of 1.04% and 0.45% respectively throughout the month.
Final asset flow figures for June showed that hedge fund managers recorded performance-based gains totalling US$2.2 billion and net investor outflows of US$9.8 billion throughout the month. Preliminary data for July estimates that the global hedge fund industry witnessed US$5.7 billion of performance-driven losses combined with US$17.1 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2396.7 billion as of July 2021. The global hedge funds industry has seen US$84.6 billion of performance-based gains and US$63.5 billion of investor allocations throughout in 2021.
Figure 1a: Summary monthly asset flow data since January 2013
Key highlights for July 2021:
- Hedge fund managers were down 0.27% in July, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 0.40% during the month. In terms of 2021 performance, global hedge funds were up 7.85%, recording the strongest July year-to-date return since 2009 despite the ongoing pandemic. Around 81.8% of the constituents of the Eurekahedge Hedge Fund Index generated positive returns in 2021.
- On an asset-weighted basis, hedge funds were down 0.45% in July, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is only up 3.57%, highlighting the struggles for some of the larger asset managers over the year.
- The Eurekahedge North American Hedge Fund Index returned -0.23% in July, trailing behind the S&P 500 and DJIA which returned 2.27% and 1.25% respectively. In terms of 2021 performance, North American hedge funds have returned 11.01% - posting the highest 2021 YTD return among the regional indices.
- The Eurekahedge European Hedge Fund Index returned 0.61% in July supported by the positive performance of the pan-European Euro Stoxx 50 which returned 0.62%. The increasing share of people fully vaccinated against COVID-19 boosted hopes that lockdowns would not be necessary despite the rising cases of the Delta variant. In terms of 2021 performance, European hedge funds have returned 6.66% - posting the second highest 2021 YTD return among the regional indices.
- The Eurekahedge Asia ex Japan Hedge Fund Index returned -1.18% in July, strongly outperforming the MSCI AC Asia Pacific Ex Japan Index which returned -5.32%. Asia ex-Japan equities were negatively impacted in July after a crackdown by Chinese authorities on technology and education companies caused Chinese equities to decline sharply – the CSI 300 and Hang Seng Index posted returns of -7.90% and -9.94% respectively. In terms of 2021 performance, Asia ex-Japan hedge funds have returned 6.56% - posting the third highest 2021 YTD return among the regional indices.
- The Eurekahedge Distressed Debt Hedge Fund Index gained 1.04% in July, extending their streak of consecutive positive monthly returns to ten months. In terms of 2021 performance, distressed debt hedge funds outperformed all of their main strategic peers and were up 11.45%, recording their strongest July year-to-date return since 2009.
- The Eurekahedge CTA/Managed Futures Hedge Fund Index returned 0.45% in July, supported by the strong return of the S&P GSCI Index which returned 1.57%. Industrial metals was the best performing component in July, posting a return of 3.52% while precious metals posted a return of 1.81%. In terms of 2021 performance, CTA/managed futures hedge funds have returned 6.35%, underperforming the S&P GSCI Index which have returned 33.47% over the first seven months of 2021.
- The Eurekahedge Event Driven Hedge Fund Index returned -0.93% in July, ending their 15-month winning streak that began in April 2020. In terms of 2021 performance, event driven hedge funds have returned 9.74% - posting the second highest 2021 YTD return among the main strategy indices.
- The Eurekahedge Long Short Equities Hedge Fund Index returned -0.69% in July, ending their 9-month winning streak that began in October 2020. In terms of 2021 performance, long short equities hedge funds have returned 9.60% - posting the third highest 2021 YTD return among the main strategy indices.
- Fund managers focusing on cryptocurrencies were up 9.85% in July as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, trailing behind Bitcoin which gained 14.50% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 103.18%, outperforming Bitcoin which returned 43.06% over the first seven months of the year.
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