Hedge Funds Are Down 0.30% For 2016 With US$2.26 Trillion AUM by Eurekahedge
Key highlights for May 2016:
- The asset weighted Mizuho-Eurekahedge Global Hedge Fund Index is down 0.30% for 2016. Total industry AUM currently stands at US$2.26 trillion, with performance-based losses of US$15.1 billion. As of May 2016 year-to-date, net inflows of US$33.2 billion have been registered.
- As at end-May 2016, event driven hedge funds led the tables with gains of 2.96%, followed by distressed debt hedge funds which were up 2.66%. On the other hand, long/short equities mandated hedge funds were the only mandate to post negative year-to-date returns (down 0.55%) – the strategy’s worst year-to-date returns since 2008.
- Among regional mandates, North American hedge funds are in the lead with a 1.03% increase in May and up 1.94% year-to-date. North American managers recorded the highest year-to-date net inflows among regional mandates this year, totalling US$15.7 billion compared to US$24.9 billion over the first five months last year.
- European hedge funds were up 1.00% this month, and down 1.25% year-to-date – the mandate’s worst year-to-date returns on record. European managers recorded strong allocations this year, with net inflows totalling US$13.4 billion during the first five months of 2016, up from US$9.2 billion over the same period last year.
- Japanese managers posted their worst year-to-date returns on record, down 2.96%. Nonetheless, they have outperformed the Nikkei 225 Index which lost 9.45% over the same period. Meanwhile, a survey of Japanese investors revealed that 90% anticipate further easing from the Bank of Japan this year. More details are available at the 3rd AIMA Japan and Eurekahedge Survey of Japanese investors.
- Asia ex-Japan managers gained 0.23% during the month and lost 2.11% year-to-date. As at end-May 2016, investors allocated US$2.5 billion to Asia ex-Japan mandated hedge funds, roughly half of the allocation volume seen in the previous year.
2016 Key Trends in Latin American Hedge Funds
Hedge funds were up 0.40% in May while underlying markets, as represented by the MSCI World Index gained 1.28% over the same period. Managers held their ground despite tight markets in May with mid-month reversals across commodities, and weaker equity performance in developing markets affecting the trading scene. Risk appetite somewhat sustained during the month with oil prices remaining resilient going into May. Distressed debt hedge funds were a clear lead among strategic mandates, up 1.66% while North American managers led regional mandates, up 1.03%. Among profitable moves for managers were long developed markets consumer stocks, some into European consumer and information technology names. Managers also gained on long Chinese tech names on the back of positive business announcements from specific stocks even though much of East Asia’s equity market weakness was led by the sell-off in Chinese markets. On the FX front, long USD positions on the back of relative dollar strength contributed to gains. Meanwhile, fluctuations on the GBP/USD currency pair caused by the ongoing ‘Brexit’ debate resulted in difficult trading ranges for some managers.
May 2016 and April 2016 returns across regions
All regional mandates were up for the month of May with North American managers leading the tables with gains of 1.03%. This is followed by European and Japanese managers who were up 1.00% each. Resilient oil prices partly helped the performance of developed market equities during the month, with the DAX and Nikkei Indices ending May up 2.23% and 3.41% respectively. Japanese equity markets were the best performers in East Asia while Chinese equity markets witnessed some sell-off during the month. Asia ex-Japan managers gained 0.23% while Latin American managers increased by a marginal 0.03% over the same period. On a year-to-date basis, gains made in early-2016 led Latin American managers to the top of the table, up 8.93%, followed by North American managers who were up 1.94%. On the other hand, Japanese, Asia ex-Japan and European managers were down 2.96%, 2.11% and 1.25% respectively over the same period.
2016 year-to-date returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index fell in May, down 0.70%. 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 3.02% in May.
Performance was lacklustre across the board among the suite of Mizuho-Eurekahedge Indices. The Mizuho-Eurekahedge Asia Pacific Index posted the steepest loss and was down 0.98% during the month. This is followed by the Mizuho-Eurekahedge Top 100 Index which lost 0.81% over the same period. The Mizuho-Eurekahedge Long/Short Equities Index declined by 0.24% while the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Emerging Markets Index witnessed losses of 0.68% each. As at 2016 year-to-date, the Mizuho-Eurekahedge Emerging Markets Index led the tables, up 6.33% while the Mizuho-Eurekahedge Asia Pacific Index posted the steepest decline of 2.33% over the same time period.
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Mizuho-Eurekahedge Indices May 2016 returns
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Mizuho-Eurekahedge Indices 2016 year-to-date returns
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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 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 May, the CBOE Eurekahedge Short Volatility Index led the tables with gains of 1.95% as volatility levels represented by the CBOE VIX fell towards the second half of the month while the CBOE Eurekahedge Relative Value Volatility Index gained 1.40%. On the other hand, the CBOE Eurekahedge Tail Risk Index declined 1.66% while the CBOE Eurekahedge Long Volatility Index was up a marginal 0.03%. It should be observed though that the latter two strategies are designed to deliver outsized returns during periods of extreme market volatility thereby providing overall portfolio level protection, hence losses can be expected during normal market conditions.
On a year-to-date basis, the CBOE Eurekahedge Relative Value Volatility Index gained 3.90% followed by the CBOE Eurekahedge Short Volatility Index which had gained 1.46%. Meanwhile, the CBOE Eurekahedge Long Volatility Index and the CBOE Eurekahedge Tail Risk Index posted year-to-date declines of 0.87% and 4.19% respectively.
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CBOE Eurekahedge Volatility Indexes May 2016 returns
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CBOE Eurekahedge Volatility Indexes 2016 year-to-date returns
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Summary monthly asset flow data since January 2012
Eurekahedge
Launched in 2001, Eurekahedge has a proven track record spanning over a decade as the world’s leading independent data provider in hedge fund news, indices and databases covering North America, Europe, Asia and Latin America. Headquartered in Singapore with offices in New York and Cebu, the global expertise of our research team constantly adapts to industry changes and needs, allowing Eurekahedge to develop and offer a wide array of products and services coveted by accredited investor groups, financial institutions and media sources. In addition to market-leading hedge fund databases and analysis, Eurekahedge’s other business functions include hedge fund publications, due diligence services, investor services, and an analytical platform service.
