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Hedge Funds Outperformed Underlying Markets Despite Volatile Conditions

Index Flash Update (8 March 2016 ) – Hedge Funds Outperformed Underlying Markets Despite Volatile Conditions by Eurekahedge

Investors flocked to safety in February as volatile market conditions continued to dominate trading during the month. Hedge funds bounced into positive territory – up 0.50% in February, outperforming underlying markets as the MSCI World Index1 declined 1.43% over the same period. As the global risk-on mode continued into February, trend following managers were positioned in good stead with holdings into bonds and gold among performance contributors. Yield on sovereign bonds particularly the Bund, ended lower in February as investors anticipate Draghi’s stimulus shots in the ECB’s coming March meeting as Eurozone growth looks to be faltering. Meanwhile, oil prices found some brief support in mid-February with the Saudi-Russia talks on production freeze, but prices saw extreme swings when talks proved to be ineffective. As a result, trading conditions for commodity currencies against the greenback were also somewhat choppy with some managers posting losses in their currency positions.

Hedge Funds Outperformance – Below are the key highlights for the month:

  • Hedge funds were up 0.50% during the month outperforming underlying markets as the MSCI World Index declined 1.43% over the same period. On a year-to-date basis, hedge funds have outperformed underlying markets by almost 6%.
  • Asian hedge funds continued their slide with Japanese managers down 3.31% in February and 5.49% year-to-date; their worst start to a calendar year on record. Asia ex-Japan mandates were down 2.06% with losses among India dedicated managers coming in at 5.66% as shown in preliminary numbers.
  • CTA/managed futures mandated hedge funds lead the table with gains of 3.11% in February as continued global risk-on sentiments placed trend-following managers in good stead with gains made from bonds, long gold and short Asian equities futures.
  • Among developed market mandates, North American managers fared well up 0.93% while European mandates were down 0.62%.
  • Distressed debt hedge fund managers posted the steepest decline, down 1.70% during the month – their fourth consecutive month in the red. 12-month losses for the strategy come in at -8.5%, the worst among all strategic mandates.
Main IndicesFeb 20162Last 3 Months2016 Returns2015 ReturnsAnnualised ReturnsConstituentsWeighting
Eurekahedge Hedge Fund Index0.50-1.83-1.111.458.93%2,663Equal
Eurekahedge 50-0.40-2.37-2.210.015.22%50Equal
Eurekahedge CTA/Managed Futures Hedge Fund Index-0.65-4.61-4.162.978.45%1044Equal
Eurekahedge Greater China Hedge Fund Index-2.06-5.94-6.907.6610.31%169Equal
Index of the MonthFeb 20162Last 3 Months2016 Returns2015 ReturnsAnnualised ReturnsConstituentsWeighting
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index3.113.134.81-1.0510.22%487Equal

Main Indices

Eurekahedge Main IndicesFeb 201622016 Returns2015 Returns
Eurekahedge Hedge Fund Index0.50-1.111.45
Eurekahedge Fund of Funds Index-0.85-3.430.36
Eurekahedge Long-only Absolute Return Fund Index0.10-6.04-2.12
Eurekahedge Islamic Fund Index0.63-3.34-1.65

Regional Indices

Performance across regional mandates was mixed during the month with Asia leading much of the weakness – Japan managers were down 3.31% respectively. Asian equities continued their slide going into February, with the Nikkei 225 ending February in the red, down 8.51% on the back of investor demand for the yen. Asia ex-Japan managers have also posted losses of 2.06% during the month – Greater China focused hedge funds declined by 0.33% while Indian mandated hedge funds dropped by 5.66% over the same period. European managers also languished during the month down 0.62%. On the other hand, Latin American hedge funds lead the tables with gains of 2.00% during February, followed by North American mandated hedge funds with gains of 0.93% over the same period.

Eurekahedge Regional IndicesFeb 201622016 Returns2015 Returns
Eurekahedge North American Hedge Fund Index0.93-1.39-0.55
Eurekahedge European Hedge Fund Index-0.62-2.874.68
Eurekahedge Eastern Europe & Russia Hedge Fund Index1.900.241.88
Eurekahedge Japan Hedge Fund Index-3.31-5.496.59
Eurekahedge Emerging Markets Hedge Fund Index0.15-3.073.26
Eurekahedge Asia ex Japan Hedge Fund Index-2.06-6.907.66
Eurekahedge Latin American Hedge Fund Index2.001.760.80

Strategy Indices

Performance across strategic mandates proved to be a mixed bag this month with CTA/managed futures mandated hedge funds posting the best gains of 3.11%. As concerns over the global economic outlook persists, trend-following CTA/managed futures managers reaped good performance with exposure into bond markets, long gold and short exposure into Asian equities among winning themes during February. Further expected stimulus measures from central bankers sent major bond yields to record lows with strong demand for the Bund, as investors expect a stronger dose of Mario Draghi’s stimulus shots in March. On the FX front, gains were made on long JPY/EUR and long USD/GBP as talks on a potential ‘Brexit’ led the GBP lower while managers posted losses from long USD/AUD and long USD/CAD exposure as commodity prices are seeing some indication of bottoming out even though the Saudi-Russia talks on output freeze which lent some support to crude oil prices in the middle of February, proved to be rather ineffective. Event driven hedge fund managers also posted gains during the month – up 1.01% as exposure into communications and technology sectors were among performance contributors for managers while macro and fixed income managers posted gains of 0.71% and 0.05% respectively.

On the other hand, distressed debt hedge funds posted the steepest loss this month of 1.70%, followed by long/short equities hedge funds which were down 0.65% over the same period. Volatility in the equity markets made trading conditions somewhat unfavorable as swings in oil prices added fuel to equity market swings during the month. Multi-strategy and relative value hedge funds also declined this month with losses of 0.27% and 0.28% respectively.

Eurekahedge Strategy IndicesFeb 201622016 Returns2015 Returns
Eurekahedge Arbitrage Hedge Fund Index0.35-0.584.74
Eurekahedge CTA/Managed Futures Hedge Fund Index3.114.81-1.05
Eurekahedge Distressed Debt Hedge Fund Index-1.70-3.55-4.44
Eurekahedge Event Driven Hedge Fund Index1.01-2.44-1.62
Eurekahedge Fixed Income Hedge Fund Index0.05-0.900.88
Eurekahedge Long Short Equities Hedge Fund Index-0.65-4.162.97
Eurekahedge Macro Hedge Fund Index0.710.391.45
Eurekahedge Multi-Strategy Hedge Fund Index-0.27-1.662.09
Eurekahedge Relative Value Hedge Fund Index-0.28-2.181.13
CBOE Eurekahedge Long Volatility Hedge Fund Index-1.960.74-1.07
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index1.380.874.47
CBOE Eurekahedge Short Volatility Hedge Fund Index1.05-0.571.03
CBOE Eurekahedge Tail Risk Hedge Fund Index3.767.42-9.69

 

Eurekahedge Global Hedge Fund Indices by Fund SizeFeb 201622016 Returns2015 Returns
Eurekahedge Small Hedge Fund Index (< US$100m)0.91-0.741.07
Eurekahedge Medium Hedge Fund Index (US$100m – US$500m)-0.04-1.612.65
Eurekahedge Large Hedge Fund Index (> US$500m)0.09-0.982.28
Eurekahedge Billion Dollar Hedge Fund Index-0.25-1.001.96

 

Mizuho-Eurekahedge IndicesFeb 201622016 Returns2015 Returns
Mizuho-Eurekahedge Index – USD-0.80-1.85-0.70
Mizuho-Eurekahedge TOP 100 Index – USD-1.58-1.780.82
Mizuho-Eurekahedge TOP 300 Index – USD-1.11-1.82-0.01

 

Asia-Eurekahedge IndicesFeb 201622016 Returns2015 Returns
Eurekahedge Greater China Hedge Fund Index-0.33-8.239.43
Eurekahedge India Hedge Fund Index-5.66-8.915.15

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1 MSCI AC World Index (Local)

2 Based on 29.59% of funds which have reported February 2016 returns as at 8 March 2016