Hedge funds finished the month of July in the red with the Eurekahedge Hedge Fund Index down 0.10% (2.82% year-to-date), outperforming the MSCI2 World Index which declined 0.83% from rising geo-political tensions between Russia and the west, and concerns over Portugal’s banking sector weighed in on investor sentiment.
Hedge Fund Inflows: Highlights
- Investor allocations for 2014 reached US$70.9 billion despite muted hedge fund returns of 2.82% year-to-date.
- European hedge funds attracted US$33.4 billion in net asset flows as at July 2014 year-to-date, up from US$29.4 billion over the same period last year.
- Assets under management of North American hedge funds breached past the US$1.4 trillion mark, with assets growing by US$62.6 billion in 2014.
- Long/short equity, fixed income and multi-strategy funds retained the top three slots in terms of investor allocations attracting with US$55.5 billion, US$15.6 billion and US$10.1 billion respectively of net asset flows July 2014 year-to-date.
- The population of CTA/managed futures funds shrank by 93 funds in the first half of the year and has witnessed net asset outflows of US$11.5 billion as at July 2014 year-to-date.
- Asia ex-Japan hedge funds outperformed all other regional mandates and are up 6.50% year-to-date and have seen their AUM grow by US$6.5 billion so far this year.
- Greater China investing hedge funds bounced back to report their third consecutive month of positive returns – up 4.13% in July and 2.90% year-to-date.
- Our special edition on activist hedge funds shows that the strategy remains popular with investors, with AUM growing by over US$30 billion since the start of 2013.
Hedge Fund Inflows: Performance update
Hedge funds edged lower to close 0.10% down by the end of July, following underlying markets as the MSCI World Index lost 0.83% during the same period. Equity markets around the world saw mixed gains, with the strongest performers being Asia Pacific and Latin America while North America and Europe suffered losses. North American and European stock indices actually traded higher during July despite rising geo-political tensions between Russia and the west before taking a steep dive in the closing week, finally giving way as a slew of international crises weighed in on investor sentiment, including but not limited to: Israel’s strikes on Gaza, Portuguese bank bailout, trade sanctions against Russia and the Ebola epidemic in Africa. Meanwhile in the US, strong second quarter growth numbers continue to create increasing anxiety regarding the timing for the Fed’s abandonment of its zero-interest-rate policy, with the US dollar appreciating sharply on the back of the stronger economy and expectation of incoming interest rate hikes. Asian markets evaded this overall negative sentiment as healthy macroeconomic numbers from China gave a boost to regional equity markets, while Latin American markets were marked by Argentina’s second default in 13 years.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
Hedge Fund Inflows: Asia ex-Japan performance
Asia ex-Japan managers were the best performers during the month, returning 2.87% as regional markets were lifted by improving macroeconomic data coming out of China which appears to have backed away from the edge. The best gains were seen in Greater China, with the buoyant mood spreading to Japanese stocks as well, contributing to the Nikkei 225 Index’s 3.03% gain in July. Japanese managers were up 0.72% during the month. Latin American hedge funds also turned a profit, up 0.73% for the month as losses in Argentine sovereign debt were compensated by a strong showing in Brazilian equity. On the other hand, European and North American mandates contributed to losses for hedge funds in July with the Eurekahedge European Hedge Fund Index down nearly 1% as the region was plagued by persistently weak inflation, concerns over Portugal’s banking sector and a fresh round of sanctions against Russia. North American managers also lost 0.70%, though outperforming the S&P 500 Index which saw losses of 1.51% during the month.
On a year-to-date basis, Asia ex-Japan and North American hedge funds lead the table with returns of 6.50% and 3.70% respectively while funds investing in Latin America were a close third, delivering returns of 3.63%. Europe and Japan mandates were tied for last place, returning close to 1.15% each. It has been a bumpy ride for hedge funds thus far this year with more negative than positive months; nevertheless the Eurekahedge Hedge Fund Index has gained 2.82% during this period.
Hedge Fund Inflows: Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index was down 1.17% in July. The top 100 constituents performed in line with their smaller counterparts, losing 1.20%. 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 month saw the US dollar rise sharply on the back of signs of improved confidence in the US economy, which could predate interest rate increases by the Fed.
The asset weighted Mizuho-Eurekahedge Asia Pacific Hedge Fund Index posted the largest gain of 2.07% as Asian equities rose strongly across the board, bringing year-to-date gains up to 4.82%. On the other hand, the Mizuho-Eurekahedge Emerging Markets Hedge Fund Index lost 0.86% during the month, underperforming the MSCI Emerging Markets Index by over 3%.
Hedge Fund Inflows: Asset flows update
Hedge funds finished the month of July in the red with the Eurekahedge Hedge Fund Index down 0.10% (2.82% year-to-date), outperforming the MSCI World Index which declined 0.83% from rising geo-political tensions between Russia and the west, and concerns over Portugal’s banking sector weighed in on investor sentiment. Despite strong second quarter growth numbers in the US, anxiety continues to grow regarding the timing for the Fed’s abandonment of its zero-interest-rate policy following dissenting opinions on the issue in the recent FOMC meeting. Asian markets evaded the overall negative sentiment as healthy macro-economic numbers from China gave a boost to regional equity markets with Asian mandated hedge funds ending July on a strong note.
Final asset flow figures for June revealed that managers raked in performance-based gains of US$8.8 billion while recording net asset inflows of US$8.7 billion as hedge funds continued to attract strong capital allocations from investors in 2014. Preliminary data for July shows that managers have posted performance-based losses of US$5.5 billion while recording net outflows of US$4.9 billion, bringing the current assets under management (AUM) of the global hedge fund industry to a total of US$2.12 trillion.