Hedge funds witnessed slightly negative returns in August amid increased risk aversion in global markets during the month. The Eurekahedge Hedge Fund Index was down 0.32% during the month, outperforming global stock indices as the MSCI World Index declined by 2.26% in August.
Key takeaways for the month of August 2013:
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- Global hedge fund AUM declined by more than US$6 billion in August
- Launch activity picks up pace in 2013 with more than 500 funds launched globally July year-to-date
- Hedge funds across major regions outperformed underlying markets in August
- Distressed debt investing remains the best performing strategy in 2013, up 10% as at end-August
- Japanese hedge funds outperformed the Nikkei 225 for the fourth consecutive month, up 18.82% year-to-date
- At 2013 year-to-date, Eurekahedge is tracking more than 600 funds that have delivered over 15% and 200 funds that are up more than 30%
Risk aversion returned to global markets in August driven by a host of factors. The increased likelihood of the United States waging another war in the Middle East, weakening economic situation in emerging markets and continued concerns of QE tapering by the US Federal Reserve (Fed) were the main drivers of the negative market sentiment during the month. Some of the negativity was offset by improving global economic data as the Eurozone emerged from recession and China PMI numbers also displaying positive trends.
Returns were mixed among the various regional mandates with Latin American and North America hedge funds delivering the strongest returns. The Eurekahedge Latin American Hedge Fund Index gained 0.48% in August mostly due to strong returns posted by Brazil-focused funds, which were up on the back of a strong rebound in the Bovespa (up 3.68%). Managers’ holdings were buoyed by surprisingly strong GDP numbers for 2Q 2013 and currency intervention program announced by the Central Bank of Brazil. North American managers outperformed the S&P 500, which declined 3.13% in August. A number of managers had indicated net short positions for August, amid expectations of an announcement of QE-tapering by the Fed, which helped them to post positive returns during the month.