Despite mixed returns, hedge fund AUM grew by US$105.6 billion in the first half of 2014 bringing the current AUM of the global hedge fund industry to a record high of US$2.12 trillion, according to data from Eurekahedge. More information from the latest Eurekahedge report below.
Hedge fund AUM – performance and flows
- Net flows into global hedge funds totalled US$65.3 billion in the first half of 2014, closely trailing the US$67.0 billion inflows during the same period last year.
- European hedge funds attracted US$31.3 billion in net asset flows in the first half of 2014, up from US$15.9 billion over the same period last year.
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- North American managers posted performance-based gains of US$29.6 billion while recording net asset flows of US$ 31.4 billion as at June-2014 year-to-date.
- Long/short equity hedge funds recorded their strongest mid-year asset flow numbers since H1 2006 – with net capital allocations of US$51.6 billion June year-to-date.
- New fund launches in Asia dropped in the first half of 2014 compared to the same period last year, with 40 hedge fund start-ups this year versus 70 in the previous year.
- North American multi-strategy and fixed income managers have performed consistently well this year, reporting gains of 8.33% and 6.35% respectively without a single losing month.
- India long/short equity funds returned another 5.69% in June, bringing their H1 2014 returns up to an impressive 32.81%.
- CTA/managed futures hedge funds recorded US$9.1 billion of outflows as of H1 2014, witnessing only one month of positive inflows in the last 12 months.
Hedge funds followed global equity markets higher to close 1.25% up by the end of June, with the Eurekahedge Hedge Fund Index reaching another new high during the month. Global equity markets saw another month of broad-based gains in June, with the strongest performers being Asia Pacific and Latin America for the emerging economies and North America for developed economies. Central bank policy remains one of supporting economic recovery, with the Fed continuing to reaffirm its stance on keeping interest rates low ‘for a considerable time’ after the end of tapering, while the ECB initiated negative rates on bank deposits in an unconventional move to raise inflation to target levels. While tensions in Ukraine appear to be easing, instability has begun brewing again in the Middle East.
May and June 2014 returns across regions
All hedge fund regional mandates ended the month in positive territory. Japanese managers were the best performers during the month, returning 2.31% supported by encouraging earnings reports and improvement in China’s manufacturing activity. Furthermore, the Japanese GPIF has signalled a planned increased in its allocations to domestic equities, a move which is likely to see investors buy back into their bullish bets on the Nikkei. In North America, accommodative monetary policies from the central bank and steady gains in US jobs data continue to drive the S&P 500 to new heights, helping the Eurekahedge North America Hedge Fund Index reach second spot with gains of 1.80% in June. Asia ex-Japan funds sit squarely in third place with returns of 1.56% as the aforementioned higher Chinese PMI figures did much to allay investor concerns while Indian equity markets continued to rally with the post election market euphoria still continuing unabated.
On a year-to-date basis, North American and Asia ex-Japan hedge funds lead the table with returns of 4.52% and 3.57% while funds investing in Japan delivered the smallest return, up 0.42% after suffering four consecutive months of losses earlier this year. Japanese equities retreated in the first few months of 2014 after their spectacular performance in 2013, triggered by doubts over the longevity of Abenomics in reviving the economy and the implementation of a sales tax hike in April.
2014 year-to-date returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index was up 0.89% in June, with the top 100 constituents underperforming their smaller counterparts, gaining only 0.49%. It should be noted that the Mizuho-Eurekahedge Index is US dollar denominated and as such during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies.
The largest gain of 2.31% was posted by the asset weighted Mizuho-Eurekahedge Asia Pacific Hedge Fund Index, with the strongest performance coming out of Japan and India equities. The Mizuho-Eurekahedge Emerging Markets Hedge Fund Index came in a close second with June returns of 1.87% while posting the highest year-to-date returns of 5.56%, outperforming the MSCI Emerging Markets Index by almost 2%.
Asset flows update
Hedge funds ended June in positive territory with the Eurekahedge Hedge Fund Index up 1.25% and ended the second quarter of the year on a stronger note. On a year-to-date basis, hedge funds are up 3.00% while the MSCI World Index has returned 4.27% in the first half of 2014. Global markets were supported by accommodative monetary policies in June and steady gains in the US jobs market data, with the ECB initiating negative rates on bank deposits and indicating that unconventional monetary policy tools were still in reserve should the mild recovery in Eurozone falter.
Final asset flow figures for May revealed that managers raked in performance-based gains of US$16.7 billion while recording net asset inflows of US$6.8 billion as hedge funds continued to attract strong capital allocations from investors in 2014. Preliminary data for June shows that managers have posted performance-based gains of US$4.8 billion while recording net outflows of US$1.8 billion, bringing the current assets under management (AUM) of the industry to US$2.12 trillion – the highest level on record.