Hedge funds were up 0.40%1 during the month of September, while underlying markets, as represented by the MSCI AC World Index (Local), gained 2.17% over the same period. Most regional mandates ended the month in the green, with Japan dedicated hedge funds in the lead as tensions on the Korean peninsula receded and the Japanese yen depreciated relative to major currency pairs. Across strategies, equity long bias hedge funds posted yet another month of gains and were up 12.55% for the year.

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September started off on a nervous note as tensions escalated on the Korean peninsula with a hydrogen bomb testing. The main shock led to selling pressure in equity markets as markets contemplated the gravity of the tensions, however, in the absence of subsequent provocations and an almost comedic name calling between President Trump and Kim Jong-un, markets were distracted away towards hawkish rhetoric coming from key central banks. The possibility of a faster than expected rate normalization put pressure on yields with the US dollar reversing its trajectory to climb higher against major currency pairs (barring the GBP). The talk of higher rates however did little to arrest the gains for equity markets which continue to trend higher hinged on the hopes of fiscal spending in developed markets, particularly the US.

Below are the key highlights for the month of September 2017:

  • Hedge funds gained 0.40% in September with underlying markets, as represented by the MSCI AC World Index (Local), up 2.17% over the same period. On a year-to-date basis, managers gained 5.50% while underlying markets were up 11.97%.
  • Among developed mandates, Japanese hedge funds posted a return of 2.01%, followed by North American and European counterparts which were up 0.89% and 0.85% for the month respectively. On a year-to-date basis, Japanese managers were up 9.13% followed by European and North American managers who posted gains of 5.89% and 4.23% respectively.
  • CTA/managed futures hedge fund managers posted the steepest decline this month, down 1.46% followed by distressed debt hedge funds which retracted 0.68% over the same period.
  • Emerging market mandates were up 1.24% for the month with strength led by underlying Latin America and Asia ex-Japan mandates. Frontier markets, as represented by the Eurekahedge Frontier Markets Hedge Fund Index, is down 0.15% for the month.
  • The Eurekahedge Long Short Equities Hedge Fund Index posted the best gains during the month, up 1.45% with strength led by underlying equity long-bias hedge funds which gained 1.66% over the same period.
  • Asia ex-Japan mandated hedge funds gained 1.35% during the month with underlying Greater China hedge fund managers led the strength up 1.17% while India hedge fund managers retracted 0.20% over the same period. On a year-to-date basis, Greater China and India mandated hedge funds posted impressive gains, up 21.04% and 20.04% respectively.
  • Among volatility focused hedge funds, short volatility hedge funds topped the table for September, gaining 0.89% while long volatility hedge funds posted a decline, down 0.35%. On a year-to-date basis, short volatility hedge funds gained 7.54% while tail risk hedge funds were down 11.22% year-to-date.

 

Main Indices September 20171 Last 3 Months 2017 Returns 2016 Returns Annualised Returns Constituents Weighting
Eurekahedge Hedge Fund Index 0.40 2.06 5.50 4.59 8.85% 2,807 Equal
Eurekahedge 50 0.39 1.92 4.73 4.27 5.52% 50 Equal
Eurekahedge North American Hedge Fund Index 0.89 1.50 4.23 7.83 9.46% 640 Equal
Eurekahedge European Hedge Fund Index 0.85 1.86 5.89 0.19 7.27% 305 Equal
Index of the Month September 20171 Last 3 Months 2017 Returns 2016 Returns Annualised Returns Constituents Weighting
CBOE Short Volatility Hedge Fund Index 0.89 2.21 7.54 5.09 8.85% 14 Equal

Main Indices

Eurekahedge Main Indices September 20171 2017 Returns 2016 Returns
Eurekahedge Hedge Fund Index 0.40 5.50 4.59
Eurekahedge Fund of Funds Index 0.36 4.72 -0.05
Eurekahedge Long-only Absolute Return Fund Index 1.29 15.98 7.49
Eurekahedge Islamic Fund Index 0.27 5.31 4.14

Regional Indices

All regional mandates ended the month of September in the green, with Japan mandated hedge funds posting the strongest gains, up 2.01% during the month and 9.13% year-to-date. Asia ex-Japan hedge funds were up 1.35% during the month, with Greater China mandates up 1.17% while India dedicated hedge funds were down 0.20% with the INR posting a steep decline against the US dollar during the month. Latin America focused hedge funds also posted strong gains with 1.97%, as underlying Brazilian markets climbed higher with the IBovespa up 4.88% in September. Meanwhile North American and European mandated hedge funds were up 0.89% and 0.85% respectively, with gains from equity hedged strategies being depressed by losses emanating from managed futures and FX trend following strategies.

On a year-to-date basis, Asia ex-Japan hedge fund managers topped the tables, and were up 14.97%, with underlying Greater China dedicated and India dedicated mandates up 21.04% and 20.04% respectively.

 

Eurekahedge Regional Indices September 20171 2017 Returns 2016 Returns
Eurekahedge North American Hedge Fund Index 0.89 4.23 7.83
Eurekahedge European Hedge Fund Index 0.85 5.89 0.19
Eurekahedge Eastern Europe & Russia Hedge Fund Index 0.28 10.13 23.08
Eurekahedge Japan Hedge Fund Index 2.01 9.13 1.72
Eurekahedge Emerging Markets Hedge Fund Index 1.24 13.53 7.10
Eurekahedge Asia ex Japan Hedge Fund Index 1.35 14.97 -0.50
Eurekahedge Latin American Hedge Fund Index 1.97 14.44 18.15

Strategy Indices

Performance across strategic mandates was a mixed bag this month with CTA/managed futures posting the steepest decline, down 1.46%. Underlying trend following focused hedge funds lead much of the weakness in CTA/managed futures strategy this month down 3.01%, followed by commodity focused hedge funds with a decline of 1.48%, as markets experienced sharp reversals on the back of hawkish monetary policy outlook. The US dollar strengthened against a basket of currencies mid-month onwards as expectations for a more aggressive rate hike began to take some root, despite persistently weak inflation data. FX proved to be a key avenue of losses for fund managers, with short positions in the GBP versus the USD failing to pay off as the pound continued its climb despite the uncertainties surround Brexit. Underlying FX focused hedge funds were down 0.40% during the month, with managers reported losses on US positions against emerging market currencies, short USD positions against TRY, MXN and PLN with the USD Index gaining 0.44% for the month. Across commodities, precious metals headed on a downtrend with the S&P GSCI Precious Metals ending the month with a decline of 3.00% while long positions in copper and nickel also generated losses for managers within base metals. Distressed debt mandated hedge funds followed next with declines of 0.68%, underperforming the US high yield markets which were up 0.90% during the month. Managers reported losses on long positions in German, US and Japanese contracts.

On the other hand, long/short equity hedge funds posted the best gains for the month, up 1.45% followed by event driven hedge funds with gains of 1.25%. Well-performing equity markets led to positive performance for most long/short equity hedge fund managers with underlying equity long bias hedge funds gaining 1.66% for the month. Equity market neutral hedge funds were also up 0.44% while equity short bias managers languished to negative territory, down 5.74%. Positive sentiment towards North America was boosted by Trump's tax reform proposal which drove US equities to all-time highs, with the NYSE Composite Index and DJIA gaining 2.81% and 2.08% respectively. While in the EU, the DAX and the CAC gained 6.41% and 4.80% respectively. In the UK, sterling strengthened against euro and dollar after a bullish stance from the BOE to possibly increase rates in the coming months given upbeat UK inflation, leading to a 0.78% loss in the FTSE. Asian equity markets were also up, with Nikkei 225 Index gaining 3.61% on the back of a weaker yen mid-month. Relative value and arbitrage hedge fund managers follow next with gains of 0.50% and 0.42% respectively. Fixed income mandated hedge funds were also up, gaining 0.32% followed by macro and multi-strategy mandated hedge funds which grew 0.31% each. Among volatility focused hedge funds, short volatility hedge fund managers topped the tables with gains of 0.89% in September whereas long volatility hedge fund managers were down 0.35% as volatility levels, represented by the CBOE VIX Index, fell towards month-end.

On a year-to-date basis, long/short hedge fund managers were up 9.00% followed by event driven hedge fund managers which gained 8.08%. Multi-strategy managers posted a return of 7.17% followed by fixed income managers which gaining 5.43% over the same year-to-date period. On the other hand, CTA/managed futures hedge fund managers were down 0.85% with weakness lad by underlying commodity focused and trend-following strategies, declining 0.70% and 4.64% year-to-date respectively.

Table 1: Index Flash Strategy Return Map

Asian Managers Hedge Funds

Eurekahedge Strategy Indices September 20171 2017 Returns 2016 Returns
Eurekahedge Arbitrage Hedge Fund Index 0.42 3.64 5.03
Eurekahedge CTA/Managed Futures Hedge Fund Index -1.46 -0.85 1.81
Eurekahedge Distressed Debt Hedge Fund Index -0.68 3.97 13.15
Eurekahedge Event Driven Hedge Fund Index 1.25 8.08 10.49
Eurekahedge Fixed Income Hedge Fund Index 0.32 5.43 6.55
Eurekahedge Long Short Equities Hedge Fund Index 1.45 9.00 3.73
Eurekahedge Macro Hedge Fund Index 0.31 2.79 3.71
Eurekahedge Multi-Strategy Hedge Fund Index 0.31 7.17 5.27
Eurekahedge Relative Value Hedge Fund Index 0.50 4.20 7.13
CBOE Eurekahedge Long Volatility Hedge Fund Index -0.35 -7.80 -2.82
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index -0.37 1.78 7.44
CBOE Eurekahedge Short Volatility Hedge Fund Index 0.89 7.54 5.09
CBOE Eurekahedge Tail Risk Hedge Fund Index -0.23 -11.22 -11.81
Eurekahedge Equity Long Bias Hedge Fund Index 1.66 12.55 5.25
Eurekahedge Equity Market Neutral Hedge Fund Index 0.44 2.67 -0.41
Eurekahedge Equity Short Bias Hedge Fund Index -5.74 -15.34 -7.35
Eurekahedge Trend Following Index -3.01 -4.64 -1.01
Eurekahedge FX Hedge Fund Index -0.40 0.43 0.91
Eurekahedge Commodity Hedge Fund Index -1.48 -0.70 6.98

 

Eurekahedge Global Hedge Fund Indices by Fund Size September 20171 2017 Returns 2016 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) 0.42 5.62 4.97
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 0.54 5.89 4.30
Eurekahedge Large Hedge Fund Index (> US$500m) -0.03 4.00 2.73
Eurekahedge Billion Dollar Hedge Fund Index -0.25 3.17 2.47

 

Mizuho-Eurekahedge Indices September 20171 2017 Returns 2016 Returns
Mizuho-Eurekahedge Index - USD 0.31 6.39 0.72
Mizuho-Eurekahedge TOP 100 Index - USD 0.41 4.61 0.25
Mizuho-Eurekahedge TOP 300 Index - USD 0.30 5.66 0.24

 

Asia-Eurekahedge Indices September 20171 2017 Returns 2016 Returns
Eurekahedge Greater China Hedge Fund Index 1.17 21.04 -4.58
Eurekahedge India Hedge Fund Index -0.20 20.04 3.85

1 Based on 34.73% of funds which have reported September 2017 returns as at 10 October 2017