Hedge Funds Down For Fourth Straight Month, Outperform Underlying Markets by Eurekahedge

Hedge funds posted their fourth consecutive month of losses with Eurekahedge Hedge Fund Index down 0.54%1 in September while the MSCI World Index2 lost 3.60% during the month. On a year-to-date basis, hedge funds are up 0.67% and have outperformed underlying markets by 6.01%, as represented by the MSCI World Index.

Soft PMI data from China and the Fed’s vacillation over its long over-due rate hike added to the risk-off sentiment in the market with global equity markets continuing their slide. Weaknesses in emerging markets along with a looming commodity induced deflationary environment will continue to be a source of worry for developed market central banks which have limited room to manoeuvre given the low interest rate environment.

Key takeaways for the month of September 2015:

  • On a year-to-date basis, hedge funds are up 0.67%, 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.
  • Among developed market investment mandates, Japanese and European managers lead with year-to-date gains of 3.19% and 3.14% respectively, while North American hedge funds are down 1.21%.
  • The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index was the best performing strategic mandate in September 2015 and on a year-to-date basis, up 2.19% and 5.00% respectively.
  • Greater China investing hedge funds were up 1.29% in September and have preserved their gains from early-2015 with gains of 4.44% year-to-date, outperforming the CSI 300 Index by almost 14%.
  • Distressed debt hedge fund strategies posted their fifth consecutive month of negative returns, down 1.59% in September. On a year-to-date basis, distressed debt funds have posted the worst return among all hedge fund strategic mandates, down 3.94% and are on track to post their worst performance since 2008 amid concerns over the prospects of high yield debt.
  • Asia ex-Japan hedge funds were up 0.57% in September and 4.18% year-to-date – the best return among all hedge fund regional investment mandates. In comparison, the MSCI AC Asia ex Japan is down 9.05% year-to-date.
Main Indices Sep 20151 Last 3 Months 2015 Returns 2014 Returns Annualised Returns Constituents Weighting
Eurekahedge Hedge Fund Index -0.54 -2.60 0.67 4.51 9.17% 2,903 Equal
Eurekahedge 50 -1.91 -2.69 -0.69 3.04 5.67% 50 Equal
Eurekahedge Long Short Equities Hedge Fund Index -1.17 -4.59 1.11 3.46 8.83% 1,126 Equal
Eurekahedge North American Hedge Fund Index 1.29 -13.68 4.44 7.60 15.69% 79 Equal
Index of the Month Sep 20151 Last 3 Months 2015 Returns 2014 Returns Annualised Returns Constituents Weighting
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index 2.19 1.40 5.00 -0.36 10.15% 41 Equal

Main Indices

Eurekahedge Main Indices Sep 20151 2015 Returns 2014 Returns
Eurekahedge Hedge Fund Index -0.54 0.67 4.51
Eurekahedge Fund of Funds Index -1.41 -0.54 3.45
Eurekahedge Long-only Absolute Return Fund Index -1.95 -2.86 3.48
Eurekahedge Islamic Fund Index 0.56 -2.13 2.63

Most regional mandates, excluding Asia ex-Japan ended the month of September in the red with Eastern Europe & Russia mandated funds witnessing the steepest decline. Asia ex-Japan investing funds were up 0.57%, while the MSCI AC Asia ex Japan Index declined 1.74%. On a year-to-date basis, the Eurekahedge Asia ex Japan Hedge Fund Index is up 4.18%, reporting the highest gains among all regional mandates and an outperformance of 13% relative to underlying markets represented by the MSCI Asia ex Japan Index. Following its worst 3-month losses on record, the Eurekahedge Greater China Hedge Fund Index was up 1.29% in September, with underlying funds outperforming the CSI 300, Shanghai and Shenzhen composite indices which declined 4.86%, 4.78% and 4.11% respectively. On a year-to-date basis, Greater China investing hedge funds have preserved their gains from early-2015 and are up 4.44%, outperforming the CSI 300 Index by almost 14%. Within the developed market mandates, Japanese hedge funds posted the strongest decline, down 1.41% followed by North American mandates down 1.24% while Europe dedicated funds declined 0.73%. The Eurekahedge Emerging Markets Hedge Fund Index was down 0.66% during the month, though managing to outperform underlying markets as the MSCI Emerging Markets Index3 declined 1.58% in September.

Regional Indices

Eurekahedge Regional Indices Aug 20151 2015 Returns 2014 Returns
Eurekahedge North American Hedge Fund Index -1.24 -1.21 5.52
Eurekahedge European Hedge Fund Index -0.73 3.14 0.65
Eurekahedge Eastern Europe & Russia Hedge Fund Index -2.40 -0.84 -23.89
Eurekahedge Japan Hedge Fund Index -1.41 3.19 5.76
Eurekahedge Emerging Markets Hedge Fund Index -0.66 0.91 3.50
Eurekahedge Asia ex Japan Hedge Fund Index 0.57 4.18 9.06
Eurekahedge Latin American Hedge Fund Index -1.55 -2.00 2.16

Strategic mandates, with the exception of volatility, CTA/managed futures and arbitrage ended the month of September in the red. Long/short equities funds were down 1.17% in September as global equity markets continued their downward slide. Latin America mandated long/short equity managers saw the steepest declines of 2.83% during the month. Hedge funds strategies utilising relative value trades on volatility saw the biggest gain among all hedge fund strategies, up 2.19%. As volatility levels, denoted by the CBOE VIX declined during the month, tail-risk strategies posted losses of 1.35% during the month. CTA/managed futures strategies, which had earlier reported steep losses in August, were up 0.92%, with managers realising gains from their short positions in equity and commodity futures. Fixed income strategies were also hurt, declining 1.03% as risk adverse investors piled into short-term US treasuries with managers realising losses from their short bets on these debt securities. Meanwhile distressed debt hedge fund strategies posted their fifth consecutive month of negative returns, down 1.59% in September. On a year-to-date basis, distressed debt funds have posted the worst return among all hedge fund strategic mandates with losses of 3.94% and are on track to post their worst performance since 2008 amid concerns over the prospects of high yield debt.

Strategy Indices

Eurekahedge Strategy Indices Sep 20151 2015 Returns 2014 Returns
Eurekahedge Arbitrage Hedge Fund Index 0.17 2.79 2.74
Eurekahedge CTA/Managed Futures Hedge Fund Index 0.92 0.42 9.26
Eurekahedge Distressed Debt Hedge Fund Index -1.59 -3.94 0.43
Eurekahedge Event Driven Hedge Fund Index -2.46 -2.63 2.52
Eurekahedge Fixed Income Hedge Fund Index -1.03 -0.11 3.46
Eurekahedge Long Short Equities Hedge Fund Index -1.17 1.11 3.46
Eurekahedge Macro Hedge Fund Index -0.53 0.51 4.16
Eurekahedge Multi-Strategy Hedge Fund Index -0.31 0.89 4.45
Eurekahedge Relative Value Hedge Fund Index -0.38 1.06 3.12
The CBOE Eurekahedge Long Volatility Hedge Fund Index 0.19 1.95 1.58
The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index 2.19 5.00 -0.36
The CBOE Eurekahedge Short Volatility Hedge Fund Index 0.71 1.48 4.47
The CBOE Eurekahedge Tail Risk Hedge Fund Index -1.35 -3.77 -3.22

 

Eurekahedge Global Hedge Fund Indices by Fund Size Sep 20151 2015 Returns 2014 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) -0.47 0.34 4.32
Eurekahedge Medium Hedge Fund Index (US$100m – US$500m) -0.68 1.66 4.67
Eurekahedge Large Hedge Fund Index (> US$500m) -0.43 1.78 5.35
Eurekahedge Billion Dollar Hedge Fund Index -0.21 1.45 4.76

 

Mizuho-Eurekahedge Indices Sep 20151 2015 Returns 2014 Returns
Mizuho-Eurekahedge Index – USD -0.03 -0.21 1.18
Mizuho-Eurekahedge TOP 100 Index – USD 0.44 1.24 2.32
Mizuho-Eurekahedge TOP 300 Index – USD -0.01 0.35 1.77

 

Asia-Eurekahedge Indices Sep 20151 2015 Returns 2014 Returns
Eurekahedge Greater China Hedge Fund Index 1.29 4.44 7.60
Eurekahedge India Hedge Fund Index 0.29 3.22 38.84

* Based on 47.05% of funds which have reported September 2015 returns as at 13 October 2015

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1 Based on 47.05% of funds which have reported September 2015 returns as at 13 October 2015

2 MSCI AC World Index (Local)

3 MSCI Emerging Markets Index (Local)