Key highlights for April 2017:

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  • Hedge funds were up 0.64% in April with 2017 year-to-date gains coming in at 3.00%. Investor appetite for hedge funds has picked up pace since the start of the year, with net inflows of US$34.8 billion.
  • AUM for the North American hedge fund industry has reached a record high of US$1.54 trillion as of April 2017. Investor subscriptions for 2017 year-to-date stood at US$29.5 billion, with US$18.4 billion of performance-based gains recorded over the same period of time.
  • The US$260.6 billion CTA/managed futures mandated hedge fund industry saw the highest net investor inflows US$11.3 billion among strategic mandates for 2017. The top 25 best performing CTA managers with a combined AUM of US$30 billion were up 4.04% for the year.
  • AUM for long/short equities hedge fund managers grew by US$19.8 billion over the year with strength led by performance-driven gains of US$17.1 billion. Long/short equities hedge fund managers are up 4.81% for the year.
  • Asian managers saw investor subscriptions of US$1.6 billion in 2017 year-to-date, with performance-based gains of US$4.1 billion. As of 2017 year-to-date, Asia ex-Japan managers were up 7.12% with underlying Greater China and Indian managers up 8.73% and 13.89% respectively. Japan focused funds were up 2.04% over the same period.
  • European managers gained 1.10% during the month, with year-to-date gains coming in at 3.41%. The US$512.4 billion European hedge fund industry grew by US$6.5 billion as of April 2017 year-to-date.
  • Sub-billion dollar hedge funds recorded strong investor interest as of 2017 year-to-date, with net inflows totaling US$16.5 billion. Within sub-billion dollar hedge funds, mid-size funds managing between US$100 million and US$500 million have seen inflows of US$12.2 billion.

2017 Key Trends in Funds of Hedge Funds

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Hedge funds posted their fourth consecutive month of gains this year, up 0.64% during the month of April. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) were up 1.17% over the same period. The Macron vs. Le Pen run-up to the French presidential election provided some relief for the markets especially for European equities as expectations for a Macron victory in the second round seemed likely. In the Eurozone and elsewhere in the world, economic data for Q1 2017 was largely encouraging with indicators pointing towards global economic expansion. However, strained geopolitical relationships among major powers and challenges faced by America's trade partners on the back of Trump's anti-trade rhetoric places the direction of economic recovery in a precarious position. With his proposed reforms in home ground still rather shaky, the course of Trump's America is still anyone's guess.

April 2017 and March 2017 returns across regions

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Among regional mandates, Asia ex-Japan hedge fund managers topped the table for the month, gaining 1.28% followed by European and Latin American managers with gains of 1.10% and 0.99% respectively. The first round of the French presidential elections saw Macron and Le Pen heading towards the second round of the elections and this provided some relief for European equity markets. Optimism on a centrist Macron victory buoyed equity markets across the board and coupled with encouraging macro data from Europe, the potential for further disintegration of the EU bloc coming from "Frexit" became less alarming. Latin American equities were modest in April, with the Mexican IPC Index gaining 1.48% while the Brazilian Ibovespa Index was up 0.48% over the same period. The renegotiations of the NAFTA deal by the Trump administration proved to be a relief for the three countries in the agreement, which would otherwise have seen the NAFTA being abolished. However, much remains to be seen as the extent of renegotiations remains a big question mark. North American and Japan managers were also in positive territory this month, gaining 0.98% and 0.40% in April.

On a year-to-date basis, Latin American managers outshone regional peers, and were up 7.41% followed by Asia ex-Japan peers who posted gains of 7.12% over the same period. European, North American and Japanese managers are also in positive territory as of April 2017 year-to-date, up 3.41%, 2.94% and 2.04% respectively.

2017 year-to-date returns across regions

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Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index gained 0.57% in April. 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 1.30% in April.

Performance was positive among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Long/Short Equities Index posting the best gains, up 1.41% during the month. The Mizuho-Eurekahedge Emerging Markets Index and the Mizuho-Eurekahedge Asia Pacific Index followed behind with gains of 1.40% and 0.85% respectively. The Mizuho-Eurekahedge Multi-Strategy Index was up a modest 0.11% this month followed by the Mizuho-Eurekahedge Top 100 Index which gained a marginal 0.06% over the same period. On a year-to-date basis, the Mizuho-Eurekahedge Emerging Markets Index led the tables with 5.91% gains followed by the Mizuho-Eurekahedge Asia Pacific Index with 5.45%. The Mizuho-Eurekahedge Long/Short Equities Index was up 4.57% followed by the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Top 100 Index which was up 2.11% and 1.26% respectively.

Mizuho-Eurekahedge Indices

April 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 to achieve capital appreciation during periods of extreme market stress.

During the month of April, the CBOE Eurekahedge Short Volatility Hedge Fund Index led the tables with gains of 1.13%, followed by the CBOE Eurekahedge Relative Value Volatility Index which gained 0.85%. All other volatility strategies languished into negative territory with the CBOE Eurekahedge Tail Risk Hedge Fund Index posting the steepest decline, down1.53% followed by the CBOE Eurekahedge Long Volatility Hedge Fund Index whichdeclined 0.76% over the same period. 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.

On a year-to-date basis, the CBOE Eurekahedge Short Volatility Hedge Fund Index topped the table, gaining 4.71% followed by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index which was up 2.28%. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index and the CBOE Eurekahedge Long Volatility Hedge Fund Index declined 6.77% and 5.05% respectively.

CBOE Eurekahedge Volatility Indexes

April 2017 returns

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CBOE Eurekahedge Volatility Indexes

2017 year-to-date returns

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Summary monthly asset flow data since January 2012

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Article by Eurekahedge

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.