Key highlights for March 2017:

2017 Hedge Fund Letters:

  • Hedge funds were up 0.34% in March with Q1 2017 gains coming in at 2.29%. Investor subscriptions have picked up pace since the start of the year, with net inflows coming in at US$26.1 billion.
  • North American hedge fund industry AUM reached a US$1.53 trillion record high. As at 2017 year-to-date investor subscriptions stood at US$23.9 billion, with US$15.2 billion of performance-based gains recorded over the same period.
  • The US$266.7 billion CTA/managed futures mandated hedge fund industry saw the highest net investor inflows of US$16.4 billion among strategic mandates for Q1 2017. Managers posted performance-based losses as of Q1 2017 totalling US$0.8 billion.
  • AUM for long/short equities hedge fund managers grew by US$8.3 billion over Q1 2017 with strength led by performance-based gains of US$12.9 billion. Long/short equities hedge fund managers are up 3.82% over the first quarter of the year.
  • Asian managers saw investor subscriptions of US$1.8 billion as of Q1 2017, with performance-based gains of US$3.1 billion. As of Q1 2017, Asia ex-Japan managers were up 5.73% with underlying Greater China and Indian managers up 2.88% and 4.18% respectively. Japan focused funds were up 1.66% over the same period.
  • European managers gained 0.73% during the month, with year-to-date gains coming in at 2.11%. The US$508.7 billion European hedge fund industry was the only region to witness year-to-date investor redemptions of US$1.3 billion while performance-based gains of US$4.1 billion were recorded.
  • Sub-billion dollar hedge funds recorded strong investor interest as of 2017 year-to-date, with net inflows totalling US$12.4 billion. Within sub-billion dollar hedge funds, mid-size funds managing between US$100 million and US$500 million have seen inflows of US$8.9 billion.

2016 Overview: Key Trends in Asian Hedge Funds

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Hedge funds gained 0.34% during the month of March, with their first quarter performance up 2.29%. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) gained 0.79% in March and are up 5.06% in the first quarter of the year. March was marked by investor scepticism over the Trump administration as proposed healthcare reforms to replace Obama’s Affordable Care Act did not meet intended outcomes. This led to an overall cautious sentiment in the market over the administration’s ability to deliver reforms in other sectors as promised during Trump’s campaign. Aside from developments in the White House, the Fed has delivered on market expectations by raising the interest rate in March though the pace of interest rate hike remains largely unchanged at an average of three rate hikes for the year. Outside of the US, the triggering of Article 50 has kick-started the official Brexit process. Strength in the Eurozone inflation rate has also propped up expectations of tightening from the ECB, which could see a convergence of monetary policy outlook for the world’s major central banks in the next 12 months.

Long/short equities and event driven hedge funds feature strongly among the pool with gains of 3.82% and 3.65% for Q1 2017. Among regional mandates, Latin America and Asia ex-Japan focused funds outshone regional peers, gaining 6.04% and 5.73% respectively.

March 2017 and February 2017 returns across regions

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Performance among regional mandates was a mixed bag this month, with Asia ex-Japan leading the table, up 2.02% despite lukewarm equity market performance across Asia. Underlying Greater China and Indian hedge fund managers propped up the performance of these managers with gains of 2.88% and 4.18% respectively.

European hedge funds follow next with gains of 0.73% backed by fair strength in the region’s equity markets and expectations over a hawkish ECB monetary policy stance over the coming months thanks to positive headline inflation in the Eurozone. North American hedge fund managers were also in positive territory in March, up 0.52%. Latin American hedge funds gained a marginal 0.02%, with the slack coming from lacklustre equity market performance in Brazil. On the other hand, Japan mandated hedge funds languished into negative territory this month, down 0.23% with the mid-month sell-off in Japanese equities edging the Nikkei 225 lower, down 1.10% for the month.

On a year-to-date basis, Latin American managers outshone regional peers, and were up 6.04% followed by Asia ex-Japan peers who posted gains of 5.73% over the same period. North American, European and Japanese managers are also in positive territory as of first quarter 2017, up 2.13%, 2.11% and 1.66% respectively.

2017 year-to-date returns across regions

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Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index gained 0.15% in March. 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 declined 0.76% in March.

Performance was a mixed bag among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Asia Pacific Index posting the best gains, up 1.00% during the month. This is followed by the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Long/Short Equities Index whichposted gains of 0.77% and 0.56% respectively. The Mizuho-Eurekahedge Emerging Markets Index was down this month, declining 0.20%, followed by the Mizuho-Eurekahedge Top 100 Index which declined 0.05% over the same period. On a year-to-date basis, Mizuho-Eurekahedge Asia Pacific Index led the tables gaining 4.30% followed by the Mizuho-Eurekahedge Emerging Markets Index with gains of 4.05%. The Mizuho-Eurekahedge Long/Short Equities Index was up 2.96% followed by the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Top 100 Index which was up 2.08% and 1.13% respectively.

Mizuho-Eurekahedge Indices March 2017 returns

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Mizuho-Eurekahedge Indices 2017 year-to-date returns

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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

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