Hedge Funds Were Up A Marginal 0.03% In August 2016 by Eurekahedge
Key highlights for August 2016:
- Hedge funds witnessed four consecutive months of outflows with investor redemptions totalling US$23.8 billion during this period. Total hedge fund assets grew by US$17.6 billion over the past eight months with the industry’s total assets currently standing at US$2.26 trillion.
- The US$800 billion long/short equity hedge fund space has seen investor redemptions of US$19.5 billion over four consecutive months ending August. The Eurekahedge Long/Short Equity Hedge Fund Index is up 1.50% for the year.
- The US$1.5 trillion North American hedge fund industry has recorded performance-based gains of US$19.3 billion over the past three months whilst seeing net investor redemptions of US$8.6 billion simultaneously. Among developed market mandates, North American managers lead up 4.54% for the year.
- Redemptions have been picking up pace in the US$531.1 billion European hedge fund industry which saw four consecutive months of outflows totalling US$13.7 billion in the period ending August. The Eurekahedge European Hedge Fund Index is down 0.95% for the year.
- Within Asia Pacific, Japan dedicated strategies have been the worst performing, down 4.51% while India dedicated mandates have posted the best returns up 7.02% for the year. Broad Asia ex-Japan mandates are up a modest 1.54% with dedicated Greater China mandates down 2.28% for the year.
- The US$252 billion CTA/managed futures hedge fund industry recorded the strongest interest from investors this year, seeing US$12.0 billion inflows as of August 2016 year-to-date. The Eurekahedge CTA/Managed Futures Hedge Fund Index is up 1.98% year-to-date with its sub-group of commodity-focused strategies gaining 7.99% while trend following strategies are up 2.34%.
- Singapore-based Asian hedge funds led the table up 2.08% while Japan and Hong Kong based Asian hedge funds are in the red among key Asian hedge fund centres, down 2.50% and 2.27% respectively for the year. More on this in the 2016 Key Trends in Asian Hedge Funds report.
2016 Key Trends in Asian Hedge Funds
Hedge funds were up a marginal 0.03% in August, with much of the weakness being led by underlying CTA/managed futures and macro mandated hedge funds. Meanwhile, underlying markets, as represented by the MSCI AC World Index (Local) grew 0.48%. While August was a relatively quiet month, central bank actions dominated the trading scene especially towards the end of the month. This affected much of the trend-following and commodity-focused hedge funds, both of which are sub-sets of the broader CTA/managed futures strategy. Nonetheless, close to 60% of the underlying constituent hedge funds for the Eurekahedge Hedge Fund Index were in positive territory for the month, with majority of them being long/short equity mandated. Asia ex-Japan hedge funds led performance among regional mandates, up 1.26% in August, followed by Latin American hedge funds which were up 0.71%. While among strategic mandates, distressed debt managers topped the table, gaining 1.71% during the month. On the other hand, CTA/managed futures hedge funds languished, declining 1.91%, followed by macro-mandated hedge funds which fell 0.32% over the same period.
On a year-to-date basis, hedge funds were up 2.58% with close to 60% of managers in positive territory. Roughly 14% of these managers posted year-to-date returns in excess of 10% over the past eight months, with 40% of these managers being long/short equity mandated, while another 20% are CTA/managed futures mandated hedge funds. The Eurekahedge Hedge Fund Index gained 2.53% over the same period, with over half of managers posting positive year-to-date returns. Roughly 12% of hedge fund managers have posted year-to-date returns in excess of 10% over the past seven months, down from 16% of funds over the same period last year. One-third of these funds posting double digit gains are long/short equity mandated while another quarter of them are CTA/managed futures mandated hedge funds.
All regional mandates were up in August with the exception of Japan-mandated hedge funds which declined 0.93% during the month. On the other hand, Asia ex-Japan hedge funds led the table among regional mandates, gaining 1.26%. Latin American hedge funds were also up in August, gaining 0.71%, followed by European and North American hedge funds which grew 0.66% and 0.57% respectively. On a year-to-date basis, Latin American hedge funds led the table, up 15.75% followed by North American and Asia ex-Japan hedge funds which gained 4.54% and 1.54% respectively. On the other hand, European and Japanese-mandated hedge funds lost 0.95% and 4.51% respectively year-to-date.
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index was down in August, declining 0.16%. 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 0.52% in August.
Performance was mixed across the board among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Emerging Markets Index posting the best gains, up 0.56% during the month. This is followed by the Mizuho-Eurekahedge Multi-Strategy Index which gained 0.49% over the same period. The Mizuho-Eurekahedge Asia Pacific Index was also up 0.30%whilethe Mizuho-Eurekahedge Long Short Equities Index lost 0.11% over the same period.The Mizuho-Eurekahedge Top 100 Index also languished in August,declining by 0.08%. As at 2016 year-to-date, the Mizuho-Eurekahedge Emerging Markets Index led the tables, up 13.03% while the Mizuho-Eurekahedge Multi-Strategy Index posted a marginal decline of 0.08% over the same time period.
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 August, the CBOE Eurekahedge Tail Risk Volatility Hedge Fund Index led the tables with gains of 0.83%, followed by the CBOE Eurekahedge Short Volatility Hedge Fund Index and the CBOE Relative Value Volatility Hedge Fund Index which were up 0.76% and 0.53% respectively this month. On the other hand, the CBOE Eurekahedge Long Volatility Hedge Fund Index was down0.20% during the month as volatility levels, represented by the CBOE VIX were in the lows in August. 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 Hedge Fund Index posted the best year-to-date gains, up 6.07%. This is followed by the CBOE Eurekahedge Short Volatility Index which gained 1.03% over the same period. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index posted the steepest decline, down 8.82% followed by the CBOE Eurekahedge Long Volatility Index which was down 1.34%.
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