Net inflows For H1 Came In At $55 Billion

Key highlights for June 2017:

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• Hedge funds are up 3.14% for the first half of the year - almost 75% of fund managers are in positive territory year-to-date while another 18% have outperformed the MSCI AC World Index (Local). Back in 1H 2016, only 56% of the managers were in the green though 65% of managers had outperformed the MSCI AC World Index (Local).
• Smaller funds managing assets in the range of US$100 million to US$500 million have raised almost US$20 billion this year, while the billion dollar club has accounted for US$32 billion in inflows as investors' appetite for hedge funds continues to improve.
• Following redemptions of US$70 billion in 2H 2016, net inflows for the first half of 2017 came in at US$55 billion. North American and European mandates accounted for US$40 billion and US$12 billion of net investor flows respectively, while emerging market mandates pulled in US$4.1 billion.
• AUM for long/short equities hedge fund managers grew by US$23.5 billion in the first half of the year on the back of strong performance-based gains. Long/short equities hedge fund managers are up 5.24% for the year, with equity-long bias funds gaining 8.11% for the year
• As of June 2017 year-to-date, Asian hedge funds have recorded a growth in AUM of US$8.1 billion, with US$5.8 billion accounted for by performance-based gains while the remainder, roughly US$2.3 billion has come through net investor allocations. Asia ex-Japan managers are up 9.24% for the year with underlying Greater China and Indian managers up 12.61% and 14.99% respectively. Japan focused funds are up 4.68% over the same period.
• The US$524.2 billion European hedge fund industry grew its AUM by US$18.3 billion as of June 2017 year-to-date, following a steep contraction in AUM of US$29.3 billion in 2016. Managers investing with a dedicated European mandate are up 4.14% for the year following a flat gain of 0.19% in 2016. For more details see the 2017 Key Trends in European Hedge Funds report.

2017 Key Trends in European Hedge Funds

Hedge funds ended their five-month winning streak, down 0.07% during June based on preliminary numbers for the month. The average return of the global hedge fund was pulled into negative territory in June as developed market mandates underperformed their emerging market peers, with trend-following and macro strategies lagging behind the pack. Meanwhile, underlying markets as represented by the MSCI AC World Index (Local) were up 0.18% over the same period. Equity markets posted mixed results during the month, with European equities ending the month in the red whilst North American mandates posted modest gains. In contrast, emerging market equity mandates were the bright spot led by strong gains for Chinese equities. Concerns over tightening monetary policy in developed markets (sans Japan) weighted on market sentiment, though there was some support from positive macro numbers coming out from China where Q2 GDP growth appears to be holding steady.

June 2017 and May 2017 returns across regions

Among regional mandates, Japan mandated hedge funds topped the table for the month, gaining 1.58%, followed by Asia ex-Japan and European mandated hedge funds with gains of 0.93% and 0.74% respectively. Emerging markets hedge funds were also up 0.24% this month. On the other hand, Latin American mandated hedge funds posted the steepest decline, down 0.74% followed by their North American counterparts with losses of 0.27%.

On a year to-date basis, hedge funds are up 3.28% while underlying markets gained 7.45%. Asia ex-Japan hedge fund managers led the table up 7.91% followed by their emerging markets and Latin American counterparts with gains of 7.06% and 6.39%.

2017 year-to-date returns across regions

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index gained 0.14% in June. 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 declined 1.44% in June.

Performance was mixed across the board among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Asia Pacific Index posting the best gains, up 1.49% during the month. This is followed by the Mizuho-Eurekahedge Long/Short Equities Index and the Mizuho-Eurekahedge Multi-Strategy Index whichwitnessed gains of 1.02%, and 0.24% respectively. On the other hand, the Mizuho-Eurekahedge Emerging Markets Index and Mizuho-Eurekahedge Top 100 Index were down this month, declining 0.11% and 0.10% respectively. On a year-to-date basis, Mizuho-Eurekahedge Asia Pacific Index led the tables gaining 7.72% followed by the Mizuho-Eurekahedge Long/Short Equities Index with returns of 7.19%. The Mizuho-Emerging Markets Index was also up 4.18% followed by the Mizuho-Eurekahedge Multi-Strategy Index which was up 3.81% and the Mizuho-Eurekahedge Top 100 Index with 2.58% growth over the same year-to-date period.

CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprise 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 June, the CBOE Eurekahedge Short Volatility Hedge Fund Index led the tables with gains of 0.50% despite volatility levels as represented by the VIX Index gaining close to 7% in June, while all other volatility strategies languished into negative territory. The CBOE Eurekahedge Long Volatility Hedge Fund Index posted the steepest decline witha1.12% loss followed by the CBOE Eurekahedge Tail Risk Hedge Fund Index and the CBOE Eurekahedge Relative Value Volatility Index whichdeclined 1.09% and 0.33% respectively. It should be observed though that tail risk and long volatility 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 Short Volatility Hedge Fund Index posted the best gains, up 5.34% followed by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index which was up 1.21%. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index posted the steepest declined, down 8.71% followed by the CBOE Eurekahedge Long Volatility Hedge Fund Index with a decline of 6.46% over the same year-to-date.

Summary monthly asset flow data since January 2012

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