Hedge Funds AUM Increased By $9.1 Bn, Down 0.58% In September

Hedge Funds AUM Increased By $9.1 Bn, Down 0.58% In September by Eurekahedge

Key highlights for September 2015:

• Hedge fund assets under management increased by US$91.0 billion in the first nine months of 2015, with US$69.0 billion of investor inflows accounting for more than half of this gain.
• On a year-to-date basis, hedge funds are up 0.62%, which compares with a gain of 3.85% seen over the same period last year. 42% of the hedge funds reporting to Eurekahedge have posted negative year-to-date returns, almost 13% higher compared to the same period last year.
• Asia ex-Japan was the best performing regional mandate during the month - up 0.67%, with Greater China mandated hedge funds gaining 1.26% over the same period.
• North American hedge funds post their fourth consecutive month of losses bringing their year-to-date returns into negative territory, down 1.31%.
• CTA/managed futures, long/short equity and multi-strategy hedge funds lead in terms of investor inflows recording US$27.5 billion, US$23.1 billion and US$15.81 billion respectively as of September 2015 year-to-date.
• Among developed market mandates, Australia/New Zealand, Japan and Europe mandated hedge funds lead with gains of 7.37%, 3.42% and 3.17% respectively as of 2015 year-to-date.

Hedge funds fell for the fourth consecutive month in September down 0.58%¹though still outperforming underlying markets as represented by the MSCI AC World Index All Core², which declined 3.60% during the month. Equity markets continued their slide this month as markets are still reeling from the Chinese equity market swing over the past months. Further to that, soft PMI data from China and the Fed vacillation over its long overdue rate hike added to the risk-off sentiment in the market while a commodity induced deflationary environment will continue to be a source of worry for emerging markets as central banks have little room to manoeuvre given the existing low interest rate environment.

The strength of the global economic recovery remains a concern for investors worldwide as data from economic powerhouses such as US and China remain meek. While the Chinese central bank is relatively accommodative, the US Fed is still deliberating the timing of its long-awaited interest rate hike. Leading up to the September FOMC meeting, the US dollar appreciated against most currencies with the USD Index up 0.44% in September. Among currencies, the Brazilian real weakened considerably against the dollar, down 8.29% as the Latin American region is heavily affected by declining commodity markets and slower demand from export destination countries.

In Asia, equity markets seem to show signs of bottoming out with the decline in Chinese equity markets becoming less steep than the previous months and while North Asian equity markets were mostly in negative territory across the board, the CSI 300 Index was down 4.86% during the month compared to the previous month (down 11.23%). Major Asian currencies also appreciated against the dollar in September with the Japanese yen up 0.97% and the Chinese yuan up 0.38% against the dollar respectively. Across strategy performance, Asia ex-Japan focused funds have posted gains in event driven, multi-strategy and long/short equity strategies compared to other regional peers. The Eurekahedge Greater China Hedge Fund Index has also posted positive gains during the month up 1.26%. Though too early to tell, events in the Asian region in the next few months could see some interesting developments.

August and September 2015 returns across regions

All regional mandates with the exception of Asia ex-Japan fell into negative territory this month as the confluence of several factors in the economy impacted investor sentiments such as monetary policy positions, falling oil and commodity prices, and weaker global economic growth. Leading the table, Asia ex-Japan mandated funds recovered from their previous month losses and was up 0.67% in September, while Latin American mandated funds suffered with losses of 1.55%. Latin America continues to be the casualty of economic uncertainty as export performance is reliant on demand from countries such as China. Furthermore, falling commodity prices, slowing demand from major destination countries and internal factors affecting Latin American countries continue to adversely affect this mandate. However, Latin American funds still managed to outperform the underlying markets as represented by the MSCI EM Latin America Index IMI³, which was down 3.27% during the month. Similarly, though North American mandated hedge funds were down 1.35% during the month, hedge funds of this mandate have also outperformed underlying markets with the MSCI North American AC Index⁴ down 3.19% while the S&P 500 Index was also down 2.64%. Europe mandated funds also did better than underlying markets even though hedge funds of this mandate posted negative returns during the month down 0.70%, while the DAX and CAC were down 5.84% and 4.25% respectively.

On a year-to-date basis, strong gains made earlier in 2015 saw Asia ex-Japan managers leading the table with gains of 4.28% followed by Japanese and European managers which were up 3.42% and 3.17% respectively. On the other hand, North American hedge fund managers lost 1.31% while Latin American managers performed the worst, declining 2.00% on a year-to-date basis.

2015 year-to-date returns across regions

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index fell into negative territory in September, down 0.15%. It should also be noted that the Mizuho-Eurekahedge Index is US dollar denominated, and during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies. The US Dollar Index was up 0.44% in September.

While losses were registered across the board among the suite of Mizuho-Eurekahedge Indices, the Mizuho-Eurekahedge Top 100 Index fared better registering a gain of 0.24% while other asset-weighted indices were in negative territory in September. The Mizuho-Eurekahedge Emerging Market Index performed the worst this month with losses of 3.65%. On a year-to-date basis, the Mizuho-Eurekahedge Top 100 Index was the best performer, up 1.04% while the Mizuho-Eurekahedge Emerging Market Index was the worst performer with losses of 10.69%. The USD Index gained 6.74% year-to-date.

Mizuho-Eurekahedge Indices September 2015 returns

Mizuho-Eurekahedge Indices September 2015 year-to-date returns

CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprises four equally-weighted volatility indices ??long volatility, short volatility, relative value and tail risk. The CBOE Eurekahedge Long Volatility Index is designed to track the performance of underlying hedge fund managers who take a net long view on implied volatility with the goal of positive absolute return. In contrast, the CBOE Eurekahedge Short Volatility Index tracks the performance of underlying hedge fund managers who take a net short view on implied volatility with the goal of positive absolute return. This strategy often involves the selling of options to take advantage of the discrepancies in current implied volatility versus expectations of subsequent implied or realised volatility. The CBOE Eurekahedge Relative Value Volatility Index on the other hand measures the performance of underlying hedge fund managers that trade relative value or opportunistic volat ility strategies. Managers utilising this strategy can pursue long, short or neutral views on volatility with a goal of positive absolute return. Meanwhile, the CBOE Eurekahedge Tail Risk Index tracks the performance of underlying hedge fund managers that specifically seek to achieve capital appreciation during periods of extreme market stress.

During the month of September, the CBOE-Eurekahedge Relative Value Index the led the tables with gains of 2.12% during the month followed by the CBOE-Eurekahedge Short Volatility Index and the CBOE-Eurekahedge Long Volatility Index which gained 0.57% and 0.33% respectively. Tail risk focused funds posted losses of 1.00% this month. On a year-to-date basis, the CBOE-Eurekahedge Relative Value Index is up 4.93% followed by the CBOE-Eurekahedge Long Volatility Index which has gained 2.10% while the CBOE-Eurekahedge Tail Risk Index posted losses of 3.42%.

CBOE Eurekahedge Volatility Indexes September 2015 returns

CBOE Eurekahedge Volatility Indexes September 2015 year-to-date returns

Summary monthly asset flow data since January 2012

 

1 Based on 52.28% of funds which have reported August 2015 returns as at 14 September 2015

2 MSCI AC World Index All Core (Local)

3 MSCI EM Latin America Index IMI (Local

4 MSCI North American AC Index (Local)

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