The Eurekahedge Hedge Fund Index was up 0.76%1 in August, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 2.45% over the same period.
Global markets were buoyed by a rise in investor risk appetite due to the continuation of highly accommodative monetary policies and the dovish comments made by Federal Reserve chairman Jerome Powell during the Jackson Hole symposium. Despite the surge in daily COVID-19 cases across the globe driven by the highly infectious Delta variant, the high vaccination rate in many developed economies have meant a slower rise in the rate of hospitalisations compared to previous waves, allowing their governments to avoid a return to costly lockdowns and to press on with their economic reopening plans. Meanwhile, data from Israel and the UK have suggested that the level of antibodies from the vaccines wanes after about six months, prompting some countries to announce booster programmes to deliver third doses to their populations. The US consumer price index softened slightly in August to 5.3% year on year, suggesting that some of the upward pressure on inflation is beginning to wane. Over in Europe, returns were positive among equity benchmarks in the region with the Euro Stoxx 50 taking the lead with a gain of 2.62%. Flash PMI for manufacturing and services in August came in at 61.5 and 59.5 respectively and inflation rose 0.8% in August to 3.0% year on year, suggesting that the momentum of the economic recovery remains strong. Returns were mostly positive across geographic mandates in August with European hedge funds in the lead with a return of 1.02% while Latin American hedge funds trailed behind their geographic peers with a return of -1.09%. Across strategies, distressed debt and long short equities hedge funds outperformed their strategic peers with returns of 0.98% and 0.97% respectively throughout the month.
Final asset flow figures for July showed that hedge fund managers recorded performance-based losses totalling US$7.5 billion and net investor inflows of US$16.9 billion throughout the month. Preliminary data for August estimates that the global hedge fund industry witnessed US$10.9 billion of performance-driven gains combined with US$4.3 billion of net investor inflows. The assets under management (AUM) of the global hedge fund industry stood at US$2409.8 billion as of August 2021. The global hedge funds industry has seen US$93.7 billion of performance-based gains and US$67.6 billion of investor allocations throughout in 2021.
Figure 1a: Summary monthly asset flow data since January 2013
Key highlights for August 2021:
- Hedge fund managers were up 0.76% in August, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 2.45% during the month. In terms of 2021 performance, global hedge funds were up 8.54%, recording the strongest August year-to-date return since 2009 despite the ongoing pandemic. Around 79.8% of the constituents of the Eurekahedge Hedge Fund Index generated positive returns in 2021.
- On an asset-weighted basis, hedge funds were up 0.19% in August, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is only up 3.92%, highlighting the struggles for some of the larger asset managers over the year.
- The Eurekahedge North American Hedge Fund Index returned 0.84% in August, trailing behind the S&P 500 and DJIA which returned 2.90% and 1.22% respectively. In terms of 2021 performance, North American hedge funds have returned 11.94% - posting the highest 2021 YTD return among the regional indices.
- The Eurekahedge European Hedge Fund Index returned 1.02% in August supported by the robust performance of the pan-European Euro Stoxx 50 which returned 2.62%. In terms of 2021 performance, European hedge funds have returned 7.77% - posting the second highest 2021 YTD return among the regional indices.
- The Eurekahedge Distressed Debt Hedge Fund Index gained 0.98% in August, extending their streak of consecutive positive monthly returns to 11 months. In terms of 2021 performance, distressed debt hedge funds outperformed all of their main strategic peers and were up 12.33%, recording their strongest August year-to-date return since 2009.
- The Eurekahedge Event Driven Hedge Fund Index returned 0.72% in August, paring some of the losses incurred in July. In terms of 2021 performance, event driven hedge funds have returned 10.82% - posting the second highest 2021 YTD return among the main strategy indices.
- The Eurekahedge Long Short Equities Hedge Fund Index returned 0.97% in August, fully recovering the losses incurred in the previous month. In terms of 2021 performance, long/short equities hedge funds have returned 10.54% - posting the third highest 2021 YTD return among the main strategy indices.
- Fund managers focusing on cryptocurrencies were up 19.29% in August as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, trailing behind Bitcoin which gained 11.33% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 137.20%, outperforming Bitcoin which returned 63.35% over the first eight months of the year.
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