Key highlights for March 2015:
- Hedge funds returned US$54.1 billion in performance-based gains for the first quarter of 2015; their highest Q1 gains on record since 2006 which brings the total industry AUM to a record high of nearly US$2.2 trillion.
- Asia ex-Japan investing funds have delivered the best returns globally and were up 2.08% for March, led by Greater China focused funds which gained 4.85%.
- European hedge funds were up 4.21% in Q1 2015 and have grown their asset base by US$10.5 billion which brings their current AUM close to a record high of US$500 billion.
- CTA/managed futures funds have reported asset inflows of US$9.7 billion for the first quarter of 2015, reversing a trend of nearly uninterrupted outflows since 2H 2013.
- North American managers lead in terms of net investor inflows recording US$8.4 billion in new allocations, roughly half the level seen for the same period last year.
Hedge funds reported their third consecutive month of gains, returning 0.78% and outperforming underlying markets as the MSCI World Index finished the month down 0.39%. Global equity markets performance was mixed, with overall gains seen in Europe and Japan while US equity markets retreated following weaker durables data signalling that perhaps the stronger dollar is finally beginning to bite into the US economic recovery. Although expected, the Federal Reserve made headlines during the month by dropping the word ‘patience’ from its statement during the month, opening up the possibility of an interest rate hike as soon as June but simultaneously reassuring investors that any rise would be gradual. European Central Bank quantitative easing remained in full effect, pushing Eurozone government bond yields further into unprecedented negative territory. Meanwhile, Greece moved dangerously closer to a default as funds began to run low while negotiations appeared to be at an impasse. While European governments and banks have made contingency plans for a Greek default, the full impact of a ‘Grexit’ remains unknown.
February and March 2015 returns across regions
Asia ex-Japan managers were the best performers during the month, returning 2.08%. Greater China equities were a major winning theme – the CSI 300 Index soared 13.74% amid speculation that the government would take steps to support faltering economic growth, while Chinese property developers rallied sharply as the government enacted policies to urge local authorities to restrict land supply. European funds were also up 0.98%, although following underlying markets higher as the MSCI Europe Index gained 0.76% on Euro weakness and the prospect of a delay in US interest rate hikes. Funds focused on Latin America and North America outperformed underlying markets which were in negative territory, gaining 0.70% and 0.49% respectively. The US S&P 500 Index ended the month lower by 1.74% as a strong dollar and weak corporate earnings growth put a dent in investor optimism. Japanese managers came in last place with gains of 0.17%, trailing the Nikkei 225 which climbed 2.18%.
In terms of 2015 year-to-date returns, Asia ex-Japan managers lead the table with returns of 4.55%, attributing much of their gains to a strong showing in Greater China and India mandated funds. Funds with a European and North American mandate came in second and third place, delivering returns of 4.21% and 2.30% respectively. Japan and Latin America focused funds were tied for last place with returns of 0.73%.
Hedge funds: 2015 year-to-date returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index gained 0.11% in March . The top 100 constituents performed better than their smaller counterparts, up 0.76% in comparison. It should be noted that the Mizuho-Eurekahedge Index is US dollar denominated and as such during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies. Based on the US dollar index, the US dollar appreciated another 3.20% in March.
The asset weighted Mizuho-Eurekahedge Emerging Markets Hedge Fund Index took a hit in March, closing sharply down 4.21%. Emerging markets mandates slid lower on currency weakness and another fall in commodity prices, with the MSCI Emerging Markets Latin America Index plunging 7.63%. The Mizuho-Eurekahedge Emerging Markets Hedge Fund Index is now down 5.24% year-to-date – the largest annual decline since 2008.
Summary monthly asset flow data since January 2011