Hedge Funds Were Up 0.88% In April; Gaining 0.39% YTD by Eurekahedge

Key highlights for April 2016:

  • Hedge funds were up 0.88% in April. On a year-to-date basis, hedge funds gained 0.39% – 51.4% of managers were in the red in April 2016 year-to-date compared to 21.2% of managers who posted negative year-to-date returns over the same period in 2015.
  • All strategic mandates were up this month with relative value hedge funds posting the best returns among all strategic mandates up 1.96%. This is followed by event driven and macro hedge funds which increased 1.34% and 1.14% respectively.
  • Long/short equities hedge funds were the only mandate to post negative year-to-date returns and lost 1.35%, the strategy worst year-to-date returns since 2008.
  • Latin American hedge funds were up for the third consecutive month, leading the tables with gains of 3.93%. On a year-to-date basis, Latin American hedge fund managers also topped the tables with 9.61% of returns. Year-to-date investor allocations for Latin American currently stands at US$0.7 billion having seen three consecutive months of inflows for the period ending April.
  • Japan-mandated hedge funds were the only regional mandate to post negative returns in April, down 0.80%. On a year-to-date basis, Japan managers decreased by 3.60% – the mandate worst year-to-date return on record.
  • European managers posted their fourth consecutive month of performance-based declines, totaling US$7.4 billion on a year-to-date basis. On the other hand, European managers also recorded the highest investor allocations across all regional mandates US$13.2 billion on a year-to-date basis.
  • Asia ex-Japan managers were up 0.92% in April, and down 1.93% year-to-date. As of April 2016, investors have allocated US$2.9 billion into Asia ex-Japan mandated hedge funds while a performance-based decline of US$2.5 billion was recorded.
  • The CBOE Eurekahedge Relative Value Volatility Index was up 0.59% in April and 2.36% on a year-to-date basis, leading the suite of CBOE Eurekahedge Volatility Indexes. For more information, please see the CBOE Eurekahedge Volatility Indexes page.

2016 Key Trends in Funds of Hedge Funds

Hedge Funds

Hedge Funds

Hedge Funds

Hedge Funds

Hedge Funds

Hedge funds outperformed underlying markets in April and were up 0.88% during the month while underlying markets as represented by the MSCI World Index gained 0.67%. Emerging market managers continued to perform well during the month supported by resilient oil and commodity prices which helped to inject some investor optimism. A confluence of factors has helped oil gain some support despite ineffective talks between OPEC members while rather encouraging Chinese macro data and stimulus measures have also aided in providing a better outlook for the Chinese economy, resulting in the climb in prices across the commodity space.

However, subsequent improvements in US GDP figures, an uptick in the US dollar (which has depreciated against most developed and emerging market currency pairs), and oversupply in the oil market vis a vis build up in US inventories and the Iran factor could potentially upset the delicate balance that has materialized over the past few months in the markets. Moreover, were oil prices to retain their recent gains, or continue their recovery, inflation expectations in the US economy could trend upwards thus making a stronger case for an earlier than expected rate hike. However, barring any formal agreement between OPEC and non-OPEC members, oil could yet again drive the markets lower. Either way, the recent market calm may not be as durable as it looks, holding possible opportunities for long volatility and equity short-bias strategies in particular.

April 2016 and March 2016 returns across regions

Hedge Funds

Latin American managers led the performance of hedge funds in April, topping the tables with gains of 3.93% as resilient oil and commodity prices supported equity markets in the region. This was followed by North American and Asia ex-Japan hedge funds with gains of 1.25% and 0.92% respectively. European managers were also up in April, gaining a modest 0.26%. On the other hand, Japan dedicated hedge funds were the only regional mandate in the red in April, down 0.80%.

On a year-to-date basis, Latin American managers have led the table, gaining 9.61% – their best year-to-date returns over the past 10 years. Despite a tough start to the year, North American managers have made some recovery and are up 0.82% on a year-to-date basis. On the other hand, Japanese, European and Asia ex-Japan managers are in the red down 3.60%, 2.11% and 1.93% respectively over the same period.

2016 year-to-date returns across regions

Hedge Funds

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index returned a flat 0.06% in April. It should also be noted that the Mizuho-Eurekahedge Index is US dollar dominated, and during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies. The US Dollar Index fell 1.59% in April.

Performance was mixed across the board among the Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Emerging Markets Index up 2.79% during the month. The Mizuho-Eurekahedge Long Short Equities Index posted gains of 0.55%, followed by the Mizuho-Eurekahedge Asia Pacific Index which grew 0.35% over the same period. For the current year, the Mizuho-Eurekahedge Emerging Markets Index has reported the best returns of 7.32% while the Mizuho-Eurekahedge Asia Pacific Index posted the steepest decline down 1.48%. On a year-to-date basis, the USD Index was down 5.63%.

Mizuho-Eurekahedge Indices April 2016 returns

Hedge Funds

Mizuho-Eurekahedge Indices 2016 year-to-date returns

Hedge Funds

CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprise four equally-weighted volatility indices long volatility, short volatility, relative value and tail risk. The CBOE Eurekahedge Long Volatility Index is designed to track the performance of underlying hedge fund managers who take a net long view on implied volatility with a goal of positive absolute return. In contrast, the CBOE Eurekahedge Short Volatility Index tracks the performance of underlying hedge fund managers who take a net short view on implied volatility with a goal of positive absolute return. This strategy often involves the selling of options to take advantage of the discrepancies in current implied volatility versus expectations of subsequent implied or realized volatility. The CBOE Eurekahedge Relative Value Volatility Index on the other hand measures the performance of underlying hedge fund managers that trade relative value or opportunistic volatility strategies. Managers utilising this strategy can pursue long, short or neutral views on volatility with a goal of positive absolute return.

During the month of April, the CBOE Eurekahedge Relative Value Volatility Index led the tables with gains of 0.59%, followed by the CBOE Eurekahedge Short Volatility Index which was up 0.40% over the same period. Volatility levels remained relatively low during the month, though the CBOE VIX did increase earlier in the month before declining. On the other hand, the CBOE Eurekahedge Long Volatility Index and the CBOE Eurekahedge Tail Risk Index were down 0.30% and 0.80% during the month. On a year-to-date basis, the CBOE Eurekahedge Relative Value Volatility Index was up 2.36%, followed by the CBOE Eurekahedge Short Volatility Index which had gained 0.47% over the same period. Meanwhile, the CBOE Eurekahedge Tail Risk Volatility Index and the CBOE Eurekahedge Long Volatility Index lost 2.39% and 0.98% on a year-to-date basis respectively. It should be observed though that the latter two strategies are designed to deliver outsized returns during periods of extreme market volatility thereby providing overall portfolio level protection, hence losses can be expected during normal market conditions.

CBOE Eurekahedge Volatility Indexes April 2016 returns

Hedge Funds

CBOE Eurekahedge Volatility Indexes 2016 year-to-date returns

Hedge Funds

Summary monthly asset flow data since January 2012

Hedge Funds

Eurekahedge

Launched in 2001, Eurekahedge has a proven track record spanning over a decade as the world’s leading independent data provider in hedge fund news, indices and databases covering North America, Europe, Asia and Latin America. Headquartered in Singapore with offices in New York and Cebu, the global expertise of our research team constantly adapts to industry changes and needs, allowing Eurekahedge to develop and offer a wide array of products and services coveted by accredited investor groups, financial institutions and media sources. In addition to market-leading hedge fund databases and analysis, Eurekahedge’s other business functions include hedge fund publications, due diligence services, investor services, and an analytical platform service.