Hedge Funds Up 0.63% In June 2016 by Eurekahedge
Key highlights for June 2016:
- Total hedge fund assets grew by US$19.9 billion for 1H 2016 with US$25.1 billion attributed to investor inflows whereas managers saw performance-driven losses of US$5.2 billion. Fund liquidations have outpaced launches for both quarters of 2016, with a total of 372 funds closing to date.
- CTA/managed futures funds topped the tables across strategic mandates for June and 1H 2016, up 3.30% and 4.33% respectively. As of 1H 2016, net inflows into the strategy have come in at US$7.2 billion, down from US$24.2 billion over the same period in 2015. The Eurekahedge Trend Following Index, a sub-group of the broad CTA/managed futures index was up 5.96% during the month.
- Closures outpaced launches for six consecutive quarters for the European hedge fund industry with a total of 484 funds liquidating since 2015. Investor have redeemed US$4.4 billion from the industry over the past two months. More on the European hedge fund industry is available in this months Key Trends in European Hedge Funds report.
- Among developed mandates, North American hedge fund managers were the best performers as of 1H 2016, up 2.80% year-to-date. North American hedge funds received the highest year-to-date allocations among all regional mandates with inflows of US$12.2 billion. This is compared to US$30.0 billion over the same period last year. On the other hand, Japanese managers were the worst performers during the month, down 2.43% as Abe mulls helicopter money.
- Long/short equity hedge funds lost 0.96% as of 1H 2016, with sub-group index the Eurekahedge Equity Long Bias Hedge Fund Index down 2.86% over the same period. Managers have posted performance based losses of US$7.8 billion in the first half of 2016, which compares with gains of US$17.3 billion for the annual year 2015.
- The Eurekahedge UCITS Hedge Fund Index was up 1.91% over the three year annualized period, compared to the Eurekahedge ex-UCITS Hedge Fund Index which gained 3.87% over the same period; a deficit of almost 200 basis points in performance for the added liquidity. For more details please refer to the Key Trends in UCITS Hedge Funds report.
- The Eurekahedge FX Hedge Fund Index is up 5.48% over a five year annualised basis, and posted gains of 0.10% in June as managers posted gains on G-10 and emerging currency pairs trading. For more details click here.
2016 Key Trends in European Hedge Funds
Hedge funds successfully traded their way around an overwhelming month in June and were up 0.63% while underlying markets as represented by the MSCI World Index lost 1.38% during the month. A number of managers had lowered their overall risk exposure in the lead up to Brexit, and were quick to reverse their positions and capitalize on winning trends that emerged subsequently such as the rally in the yen and emerging currency pairs vis a vis US dollar; and short positions in the pound which declined to historic lows. CTA/managed futures managers were the top gainers, leading the performance of strategic mandates this month as managers were able to capture key macro trends in the markets. While the Brexit referendum has thrown markets off-balance in June, equity markets recovered in the final week of June and volatility levels reversed its mid-month spike as the markets somewhat got over the initial Brexit shock.
While performance has varied across regional exposures and strategic mandates as of 1H 2016, almost 20% of the managers have posted first half returns in excess of 5%, with almost 15% delivering returns upwards of 7%. Of these funds delivering upwards of 7% on a year-to-date basis, long/short equities and CTA/managed futures strategies constitute a good one-half of the funds, with managers focused on North American equities featuring strongly in this pool.
May 2016 and April 2016 returns across regions
Performance was mixed among regional mandates for the month of June with Latin American managers a clear lead among their regional peers, gaining 4.17%, followed by North American managers who were up 1.02% over the same period. Asia ex-Japan managers also ended the month in positive territory, up 0.44%. On the other hand, Japanese and European managers were down in June, posting losses of 2.43% and 1.57% respectively.
On a year-to-date basis, Latin American managers lead the tables once again, up 12.81% followed by North American managers who gained 2.80%. Year-to-date performance for other regional mandates was lacklustre with Japanese managers posting the steepest loss down 5.48%. European and Asia ex-Japan managers were also in the red, down 2.89% and 1.96% respectively year-to-date.
2016 year-to-date returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index was flat in June, gaining a marginal 0.02%. 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 gained 0.26% in June.
Performance was mixed across the board among the suite of Mizuho-Eurekahedge Indices. The Mizuho-Eurekahedge Emerging Markets Index posted the best gains and was up 7.95% during the month. This is followed by the Mizuho-Eurekahedge Asia Pacific Index which gained 1.04% over the same period. The Mizuho-Eurekahedge Multi-Strategy Index posted the steepest decline, down 1.58%followed by the Mizuho-Eurekahedge Long/Short Equities Index which lost 1.46% over the same period.As at 2016 year-to-date, the Mizuho-Eurekahedge Emerging Markets Index led the tables, up 14.15% while the Mizuho-Eurekahedge Multi-Strategy Index posted the steepest decline of 2.34% in June.
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Mizuho-Eurekahedge Indices June 2016 returns
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Mizuho-Eurekahedge Indices 2016 year-to-date returns
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CBOE Eurekahedge Volatility Indexes
The CBOE Eurekahedge Volatility Indexes comprises 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 realised 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. Meanwhile, the CBOE Eurekahedge Tail Risk Index tracks the performance of underlying hedge fund managers that specifically seek to achieve capital appreciation during periods of extreme market stress.
During the month of June, the CBOE Eurekahedge Long Volatility Index led the tables with gains of 0.45% as volatility levels, represented by the CBOE VIX spiked up towards the end of the month. The VIX gained 10.15% during the month. The CBOE Eurekahedge Relative Value Volatility Index was also up during the month, gaining 0.11%. Contrary to expectations, the CBOE Eurekahedge Tail Risk Hedge Fund Index declined 3.51% followed by the CBOE Eurekahedge Short Volatility Index which was down 0.95%. The performance of tail risk hedge funds fell below expectations even though June was a highly-volatile month as the build-up in volatility levels in the run-up to Brexit eventually reversed a few days after the referendum, with equity markets also recovering towards the end of June. It should be observed though that tail risk and long volatility 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.
The CBOE Eurekahedge Relative Value Volatility Index was the only strategy to post year-to-date gains, up 4.84%. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index posted the steepest decline, down 7.50% followed by the CBOE Eurekahedge Long Volatility Index and the CBOE Short Volatility Index which was down 0.80% and 0.33% respectively.
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June 2016 returns
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CBOE Eurekahedge Volatility Indexes
2016 year-to-date returns
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Summary monthly asset flow data since January 2012
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