Hedge funds were off to a good start in the first month of the year, with the Eurekahedge Hedge Fund Index up 1.43% in January, beating the MSCI World Index which finished the month down 0.41%.

Hedge funds: Key takeaways for the month of January 2015:

  • Hedge funds outperformed underlying markets as heavyweights shone with the Eurekahedge Billion Dollar Hedge Fund Index up 1.79% during the month.
  • Assets under management of multi-strategy hedge funds touched an all time high of US$337.5 billion, with managers raking in performance-based gains of US$6 billion in January alone.
  • CTA/managed futures funds delivered the best performance among all strategic mandates, up 4.65% in January as managers won big on oil and currency futures.
  • Distressed debt strategies were down another 2.01% this month, reporting their fifth month of negative returns.
  • Indian hedge funds were the top performers with gains of 6.80% while Eastern Europe and Russia mandated funds delivered the worst results down 2.46% for the month.
  • India focused hedge fund managers weighed in on their winning themes, investor interest in their offering and their biggest worries for 2015 in an exclusive interview with Eurekahedge. For details please download the Eurekahedge Special Report on Indian Hedge Funds.
Main Indices Jan
2015
Last 3 Months 2014 Returns Annualised Returns Constituents Weighting
Eurekahedge Hedge Fund Index 1.43 2.53 4.39 9.61% 2,855 Equal
Eurekahedge 50 -0.03 0.54 2.69 6.22% 50 Equal
Eurekahedge CTA/Managed Futures Hedge Fund Index 4.65 8.57 9.25 10.99% 511 Equal
Eurekahedge European Hedge Fund Index 0.99 1.47 0.69 7.81% 319 Equal
Index of the Month Jan
2015
Last 3 Months 2014 Returns Annualised Returns Constituents Weighting
Eurekahedge Macro Hedge Fund Index 2.35 3.97 4.00 8.98% 212 Equal

Hedge Funds: Regional Indices

Eurekahedge Regional Indices Jan
2015*
2014 Returns
North American 0.44 5.64
European 0.99 0.69
Eastern Europe & Russia -2.46 -25.07
Japan -1.18 5.21
Emerging Markets -0.44 3.51
Asia ex-Japan 1.47 9.50
Latin American 1.58 2.47

 

Global equity markets displayed mixed performance in January as the economic picture remained weak with fears mounting about a lack of global demand and high sovereign debt burdens. Despite the strong economic picture in the US, concerns over slowing growth overseas, the stronger US dollar and fall in crude oil prices have begun to affect corporate profits, resulting in US equity markets closing the month in negative territory. In line with market expectations, the European Central Bank announced its intention to begin quantitative easing in March, surprising participants with the size of its asset purchase program which was set at 60 billion Euros a month – fuelling a further rally in European equities. This policy divergence with the US also resulted in further Euro weakness and a number of European sovereign bond yields falling into negative territory, with the surprise uncoupling of the Swiss Franc from the Euro exacerbating the Euro’s fall during the month.

During January, Eastern Europe and Russia hedge funds saw their seventh consecutive month of losses with the Eurekahedge Eastern Europe & Russia Hedge Fund Index down 2.46%, though managing to outperform the Russian RTS stock index which dropped 6.75%. The heavily oil-dependent Russian economy and the rouble continued to face pressure during the month over simmering tensions in Ukraine and a bleak outlook for oil prices which look set to stay at the current low prices. The Russian central bank revised the country’s benchmark rate down 2% to 15% this month in a bid to stimulate the economy after drastically raising interest rates to 17% overnight in December to defend its currency. Latin American managers were also down 1.58%, negatively impacted by the broad sell-off in commodities and capital outflows as the MSCI Latin America Index[1] fell 5.15%. Similarly, mangers investing with a Japan mandate realised losses of 1.18% in January, underperforming the benchmark Nikkei 225 which rose 1.28%. On the other hand, Asia ex-Japan focused hedge funds posted the best returns of 1.47% in January, with Indian managers once again taking the lead this year. The Indian BSE Sensex Index climbed 6.35% during the month as the country’s economic outlook was revised upwards thanks to lower oil prices and a surprise rate cut by the country’s central bank. European managers came in second place, gaining 0.99% in January which outstripped returns for the entire year of 2014, buoyed by strong underlying markets as the MSCI Europe Index[2] gained 3.79%.

Hedge Funds: Strategy Indices

January saw a return of volatility in the market as central bank actions dominated the markets, with the CBOE VIX Index rising from 19.2 to 20.97 amid this atmosphere of uncertainty. CTA/managed futures managers once again posted the largest return out of all strategic mandates at 4.65%, attributing gains to short oil positions, the strengthening US dollar and rising European equity market indices. Macro and multi-strategy funds also performed well, up 2.35% and 1.29% respectively. Despite some of the high profile losses on the Swiss franc/Euro bet, macro managers on the whole had positioned themselves well in anticipation of another round of quantitative easing from the European Central Bank, being long European indices and short the Euro and also long US treasuries. Those positions were rewarded handsomely following Draghi’s confirmation of quantitative easing starting in March. On the other hand, distressed debt and event driven strategies were down the most during the month, losing 2.01% and 1.66%. Managers had jumped on the opportunity to invest in the debt of distressed oil and gas producers following the precipitous drop in oil prices posted losses as those bonds continue to trade at steep discounts due to lingering uncertainty over their issuers’ ability to remain solvent following the continued slump in crude oil prices.

Eurekahedge Strategy Indices Jan
2015*
2014 Returns
Arbitrage -0.27 3.07
CTA/Managed Futures 4.65 9.25
Distressed Debt -2.01 0.97
Event Driven -1.66 1.88
Fixed Income 0.44 3.20
Long/Short Equities 0.35 3.43
Macro 2.35 4.00
Multi-Strategy 1.29 4.34
Relative Value -0.71 2.11

 

Mizuho-Eurekahedge Indices Jan
2015*
2014 Returns
Mizuho-Eurekahedge Index – USD 1.26 1.19
TOP 100 Index – USD 2.71 2.32
TOP 300 Index – USD 1.79 1.80

 

[1] MSCI EM Latin America Index IMI (Local)

[2] MSCI AC Europe Index All Core (Local)