Key highlights for February 2017:

2016 Hedge Fund Letters

  • Hedge funds were up 0.97% in February with year-to-date gains coming in at 1.87%. Investor subscriptions have picked up pace since the start of 2017, with net inflows coming in at US$17.1 billion.
  • AUM for the North American hedge fund industry has reached a record high of US$1.52 trillion. Investor subscriptions for 2017 year-to-date stood at US$15.8 billion, with US$11.7 billion of performance-based gains recorded over the same period of time.
  • The US$261.0 billion CTA/managed futures mandated hedge fund industry saw the highest net investor inflows among strategic mandates for 2017 (US$8.4 billion). Managers posted modest performance-based gains totalling US$1.4 billion over the same period.
  • AUM for long/short equities hedge fund managers grew by US$10.1 billion over the first two months of the year with strength led by performance-based gains of US$8.6 billion. Long/short equities hedge fund managers are up 2.72% over the past two months.
  • Asian managers saw investor subscriptions of US$1.5 billion on a year-to-date basis, with performance-based gains of US$1.9 billion. On a year-to-date basis, Asia ex-Japan managers were up 3.55% with underlying Greater China and Indian managers up 5.49% and 6.76% respectively. Japan focused funds were up 1.67% over the same period.
  • European managers gained 0.52% during the month, with year-to-date gains coming in at 1.16%. The US$507.5 billion European hedge fund industry was the only region to witness year-to-date investor redemptions of US$1.2 billion while performance-based gains of US$2.8 billion were recorded.
  • Sub-billion dollar hedge funds recorded strong investor interest as of 2017 year-to-date, with net inflows totalling US$9.1 billion. Within sub-billion dollar hedge funds, mid-size funds managing between US$100 million and US$500 million have seen inflows of US$4.9 billion.

2016 Overview: Key Trends in North American Hedge Funds

Hedge Funds Feb

Hedge Funds Feb

Hedge Funds Feb

Hedge Funds Feb

Hedge Funds Feb

Hedge funds gained 0.97% during the month of February. Meanwhile underlying markets as represented by the MSCI AC World Index (Local) gained 2.72% over the same period. February was marked by strong performance in US equities on the back of Trump’s fiscal and monetary policy announcements with the S&P 500 ending the month up 3.78%. Economic data out of the US also shed a positive light on the region with a pick-up in inflation bolstered by retail activity. Investor expectations of the rate hike by the Fed were also shaped by an increasingly hawkish Fed suggesting that the next rate hike could occur in the very near future. Among regional mandates Latin American hedge funds managers gained 2.75%, while among strategic mandates distressed debt hedge funds topped the table with 1.34%, followed by event driven hedge funds which gained 1.26% during the month. On a year-to-date basis, hedge funds are up 1.87%, with roughly 11% of managers posting returns greater than 5% over the same period.

February 2017 and January 2017 returns across regions

Hedge Funds Feb

All regional mandates were in positive territory during the month, with Latin American mandated hedge funds topping the table, up 2.75%. Latin American equity markets performed well in February with the Ibovespa Index up 3.08%. Asia ex-Japan managers were up 1.43% followed by North American managers with gains of 0.76%. European and Japanese managers also ended the month in positive territory and were up 0.52% and 0.40% respectively.

On a year-to-date basis, Latin American hedge fund managers gained 6.56% followed by Asia ex-Japan hedge fund managers which were up3.55%. North American hedge funds managers were up 1.76% followed by Japanese and European managers with gains of 1.67% and 1.16% respectively.

2017 year-to-date returns across regions

Hedge Funds Feb

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index gained 0.63% in February. It should also be noted that the Mizuho-Eurekahedge Index is US dollar denominated, 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 1.62% in February.

Performance was positive across the board among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Emerging Markets Index posting the best gains, up 1.82% during the month. The Mizuho-Eurekahedge Asia Pacific Index and the Mizuho-Eurekahedge Top 100 Index came in second and third with gains of 1.34% and 0.78% respectively. The Mizuho-Eurekahedge Multi-Strategy Index grew 0.61% followed by the Mizuho-Eurekahedge Long/Short Equities Index with gains of 0.42% over the same period. On a year-to-date basis, Mizuho-Eurekahedge Emerging Markets Index led the tables with 4.34% followed by the Mizuho-Eurekahedge Asia Pacific Index with 3.34%. The Mizuho-Eurekahedge Long/Short Equities Index was up 2.41% followed by the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Top 100 Index which was up 1.39% and 1.26% respectively.

Mizuho-Eurekahedge Indices February 2017 returns

Hedge Funds Feb

Mizuho-Eurekahedge Indices 2017 year-to-date returns

Hedge Funds Feb

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 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 February, the CBOE Eurekahedge Short Volatility Hedge Fund Index led the tables with gains of 0.57%, while all other volatility strategies languished into negative territory. The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index posted the steepest decline, down0.85% followed by the CBOE Eurekahedge Long Volatility Hedge Fund Index and the CBOE Eurekahedge Tail Risk Hedge Fund Index whichdeclined 0.69% and 0.30% respectively. It should be observed 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.

On a year-to-date basis, the CBOE Eurekahedge Short Volatility Hedge Fund Index topped the table, gaining 2.04% followed by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index which was up a marginal 0.06%. On the other hand, the

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