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Hedge Funds AUM Stand At US$2.24 Trillion As At End-2015

Hedge Funds AUM Stand At US$2.24 Trillion As At End-2015 by Eurekahedge

Key highlights for January 2016:

  • Hedge funds assets under management stand at US$2.24 trillion as at end-2015 – investor inflows account for three quarters of the industry US$108.7 billion asset growth in 2015.
  • Asian managers posted their weakest returns since August last year, with Greater China mandated funds down 5.76% in January while Japan dedicated funds lost 2.71%. The Asian hedge fund space expanded by US$10.7 billion in 2015 through a combination of investor flows and performance-based gains.
  • Event driven hedge funds posted the worst returns among all hedge fund strategic mandates, down 3.56% in January. North American and European event driven managers were down 5.36% and 3.14% respectively while Asian managers posted losses of 4.65% in what is turning out to be the worst month for the strategy since 2011.
  • The European hedge funds sector registered the strongest growth in AUM among all regional mandates in 2015, growing their asset base by almost 10% during the year to US$535 billion. Investor allocations to the region stood at US$ 40.5 billion, a year-on-year increase of 110%.
  • CTA/managed futures, tail-risk and long volatility were the only strategies to end the month in green with returns coming in at 2.32%, 3.53% and 2.59% respectively. For more details on volatility strategies refer to the CBOE Eurekahedge Volatility Indexes.
  • The US$80.9 billion Islamic funds industry managed to outperform the Dow Jones Islamic World Index in 2015 despite a very challenging market environment that saw a spike in investor redemptions as oil dependent economies in the Middle East call down capital in the face of worsening budget deficits. For more details refer to the 2015 Overview: Key Trends in Islamic Funds report.

January was not a happy start to the year for hedge funds as managers witnessed a drag in performance – down 1.20% during the month. Investor panic induced strong downward pressure on equity markets leading to a sell-off and the resulting capital flight to safe havens. The MSCI World Index declined 5.71% over the same period with much of the weakness in the global equity markets being led by Asia. Indeed, all eyes were on Asia in January as developments in East Asian economies along with a tumbling oil price took centre stage and sent ripples throughout the region and beyond. Equity market volatility dominated trading throughout the month as concerns over the health of the Chinese economy also added to the bleak market outlook. Oil found some support during the month as a cold spell in the US took some heat off China following a brief recovery in oil prices. Meanwhile, the Bank of Japan (BoJ) caught the markets by surprise in late January by announcing negati ve interest rates – this followed a dismal start to the year for Japanese equities with the Nikkei 225 declining 7.96% during the month.

All regional mandates were in negative territory during the month, with Asia ex-Japan hedge funds posting the steepest decline – down 3.15%, followed by Japanese hedge funds which lost 2.71%. Asia ex-Japan long/short equities hedge funds have taken a beating, with its Greater China long/short equities constituents down 5.96% in January as both the weak yuan and Chinese PMI data fuelled strong sell-off activity in the region. Across strategic mandates, CTA/managed futures managers posted gains during the month – up 2.32%, while other strategic mandates languished into negative territory. Short exposure into Asian equity futures paid off for some CTA/managed futures hedge funds. As investors flocked to safe havens, managers with exposure into the German Bund and the Japanese JGB also saw good gains. Long/short equities managers dropped by 3.04% during the month as global equities fell sharply; sector exposure into materials, energy and financials were among perfo rmance detractors. On the other hand, managers who were bearish on China realized returns despite the overall weakness in the region equity markets.

2016 is looking to be a volatile yet interesting year ahead with central bankers flailing their arms in pursuit of their inflation targets. We are still left to ponder a dreary conundrum of why and how policy – hots – throughout the past year have ironically made the markets rather immune to stimulus.

January 2016 and December 2015 returns across regions

Hedge Funds

All regional mandates were down this month led by Asia ex-Japan and Japan focused hedge funds with losses of 3.15% and 2.71% respectively. North American managers declined by 2.03% while European and Latin American hedge funds lost 1.99% and 1.00% respectively. The year of 2015 saw Asia ex-Japan leading the table with gains of 7.97% followed by Japan with gains of 6.56%. Indeed, we presume that Asia ex-Japan all from grace – was a result of the markets catching up with economic fundamentals as concerns over the Chinese economy and defensive measures to stem the weakening yuan culminated into investor panic. European managers also managed to post tidy returns of 4.74% last year while Latin American managers eked out a 0.66% gain over the same period. North American focused hedge funds were the only regional mandate which saw a drag in performance down 0.69% in 2015 -their worst annual return on record since 2008.

2015 returns across regions

Hedge Funds

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index fell in January, down 0.58%. It should also be noted that the Mizuho-Eurekahedge Index is US dollar dominated, 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 gained 0.99% in January.

Performance was lacklustre across the board among the suite of Mizuho-Eurekahedge Indices led by the Mizuho-Eurekahedge Asia Pacific Index with losses of 3.63%, followed by the Mizuho-Eurekahedge Long Short Equities Index with losses of 1.93% over the same period. In 2015, the Mizuho-Eurekahedge Asia Pacific Index led the tables with gains of 4.42% followed by the Mizuho-Eurekahedge Multi-Strategy Index which was up 1.65%. On the other hand, the Mizuho-Eurekahedge Emerging Market Index performed the worst with losses of 7.56% over the same period. The USD Index gained 9.26% in 2015.

Mizuho-Eurekahedge Indices
January 2016 returnsHedge Funds
Mizuho-Eurekahedge Indices
2015 returnsHedge Funds

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 a 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 a 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 volatility s trategies. 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 January, the CBOE Eurekahedge Tail Risk Volatility Index the led the tables with gains of 3.53% followed by the CBOE Eurekahedge Long Volatility Index with gains of 2.59% as volatility levels as represented by the CBOE VIX spiked during the month. The CBOE Eurekahedge Short Volatility Index declined 1.03% while the CBOE Eurekahedge Relative Value Volatility Index dipped by 0.17%. In 2015, the CBOE-Eurekahedge Relative Value Volatility Index was up 4.50% followed by the CBOE Eurekahedge Short Volatility Index which had gained 0.98%. The CBOE Eurekahedge Long Volatility Index lost 1.06% while the CBOE Eurekahedge Tail Risk Volatility Index posted losses of 9.69% over the same period, however both long volatility and tail-risk funds lived up to their reputation by delivering strong returns during the 3-month period ending August when global markets saw steep decline s led by a sell-off in Chinese equities.

CBOE Eurekahedge Volatility Indexes
January 2016 returns
Hedge Funds
CBOE Eurekahedge Volatility Indexes
2015 returns
Hedge Funds

Hedge funds – Summary monthly asset flow data since January 2012

Hedge Funds

1 Based on 47.74% of funds which have reported January 2016 returns as at 12 February 2016

2 MSCI AC World Index (Local)

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