Key highlights for August 2017:
- Fund of funds Business Keeps Dying
- Baupost Letter Points To Concern Over Risk Parity, Systematic Strategies During Crisis
- AI Hedge Fund Robots Beating Their Human Masters
- Hedge funds were up 5.12% year-to-date, registering performance-based gains of US$58.5 billion while seeing net asset inflows of US$81.9 billion as of 2017 year-to-date. Total hedge fund assets grew by US$140.45 billion over the past eight months with the industry's total assets currently standing at US$2.37 trillion.
- In what is turning out to be the best year in terms of investor allocations since 2013, arbitrage, long/short equities and CTA/managed future strategies led in terms of net flows attracting with US$14.6 billion, US$13.7 billion and US$12.6 billion respectively as of 2017 year-to-date.
- Across regional mandates, North American and European mandates combined have attracted US$72.5 billion in investor flows this year, following redemptions of US$49.7 billion in 2016.
- Smaller funds managing assets in the range of US$100 million to US$500 million have raised almost US$26 billion this year, while the billion dollar club has accounted for US$46 billion in inflows as investor appetite for hedge funds continues to improve.
- Asian hedge fund managers outperformed their global peers in 2017 and have grown their asset base by US$13.6 billion this year, the strongest showing since 2013. On a year-to-date basis, Asia ex-Japan managers were up 14.02% with underlying Greater China and Indian managers up 19.25% and 20.92% respectively. Japan focused funds were up 6.28% over the same period.
- Hong Kong-based Asian hedge funds led the table up 13.41% among key Asian hedge fund centers whilst Singapore and Japan-based Asian hedge funds are also in positive territory, up 9.59% and 5.24% respectively for the year. More on this in the 2017 Key Trends in Asian Hedge Funds report.
2017 Key Trends in Asian Hedge Funds
Carlson Capital's Double Black Diamond fund added 1.47% net of fees in May, taking its year-to-date performance to 5.2%, according to a copy of the fund's letter, which ValueWalk has been able to review. Q1 2021 hedge fund letters, conferences and more Founded in 1993 by Clint Carlson, Carlson Capital has struggled to retain assets Read More
Hedge funds continued their uptrend and gained 0.73% in August, outperforming underlying markets as represented by the MSCI AC World Index (Local) which gained 0.15% during the month. Almost all hedge fund strategies ended the month in the green, with CTA/managed futures up 1.24% and macro hedge funds up 1.04% delivering the strongest gains. Across regional mandates, emerging markets focused hedge funds continued to post strong gains relative to their developed market peers contributed in part by the depreciating US dollar which is down almost 9.34% year-to-date.
August was dominated by geopolitical tensions on the Korean peninsula as the risk of a nuclear showdown between the North and the US led allies became more palpable. The event overshadowed US job gains posted earlier during the month, leading to a short-lived spike in volatility and sell off in equities. The Japanese yen, despite being on the frontline of North Korean aggression, maintained its safe-haven status, and along with the Chinese renminbi posted gains against the US dollar. Fixed income markets saw declining yields in the flight for safe haven assets, with defensive comments from the central bank meeting at the Jackson Hole symposium doing little to lift market expectations. While the Korean crisis appears to be on track towards a calculated de-escalation, the Fedâ€™s balance sheet deleveraging will remain a more cumbersome undertaking and is likely be the main challenge to the market calm and appetite for risk as we head into the year end.
August 2017 and July 2017 returns across regions
All regional mandates ended the month of August in the green, with Latin American mandated hedge funds posting the strongest gains, up 3.26% during the month as emerging markets continued their strong run in 2017. Asia ex-Japan and Europe managers were also up with gains of 1.50% and 0.44% respectively. Japanese managers were up 0.30%, followed by North American managers who posted the weakest gains in August, up 0.04%. On a year-to-date basis, Asia ex-Japan managers outshone regional peers, and were up 14.02% followed by Latin American peers who posted gains of 12.86% over the same period. Japanese, European and North American managers are also in positive territory as of August 2017 year-to-date, with gains of 6.28%, 4.83% and 3.30% respectively.
2017 year-to-date returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index gained 0.69% in August. 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 0.21% in August.
Performance was a mixed bag across the board among the suite of Mizuho-Eurekahedge Indices with the Mizuho-Eurekahedge Emerging Markets Index posting the best gains once again, up 1.56% during the month. This is followed by the Mizuho-Eurekahedge Asia Pacific Index, the Mizuho-Eurekahedge Long/Short Equities Index and the Mizuho-Eurekahedge Top 100 Index whichposted gains of 1.17%, 0.95% and 0.62% respectively. On the other hand, the Mizuho- Eurekahedge Multi-Strategy Index posting the steepest loss, down 0.16% during the month. As at 2017 year-to-date, the Mizuho-Eurekahedge Asia Pacific Index topped the tables up 11.64% followed by the Mizuho-Eurekahedge Long/Short Equities Index with gains of 10.39%. Mizuho-Emerging Markets Index was also up 8.79% year-to-date followed by the Mizuho-Eurekahedge Multi-Strategy Index and the Mizuho-Eurekahedge Top 100 Index which were up 4.71% and 4.18% respectively over the same time period.
Mizuho-Eurekahedge Indices August 2017 returns
Mizuho-Eurekahedge Indices 2017 year-to-date returns
CBOE Eurekahedge Volatility Indexes
The CBOE Eurekahedge Volatility Indexes comprise four equally-weighted volatility indices â€“ 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 August, the CBOE Eurekahedge Short Volatility Hedge Fund Index led the tables with gains of 0.91%, followed by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index which was up 0.85% despite volatility levels as captured by the CBOE VIX spiked briefly before settling lower with the VIX Index gaining close to 3.22% in August. Managers running a long volatility mandate were in positive territory in August following seven consecutive months of losses as the North Korean crisis brought volatility back to life with the CBOE Eurekahedge Long Volatility Hedge Fund Index up 0.54% during the month. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index fell 1.49% over the same period. 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 of 6.85% followed by the CBOE Eurekahedge Relative Value Volatility Hedge Fund Index which was up 2.63%. On the other hand, the CBOE Eurekahedge Tail Risk Hedge Fund Index posted the steepest declined, down 11.23% followed by the CBOE Eurekahedge Long Volatility Hedge Fund Index with a decline of 7.46% over the same year-to-date period.
CBOE Eurekahedge Volatility Indexes August 2017 returns
CBOE Eurekahedge Volatility Indexes 2017 year-to-date returns
Summary monthly asset flow data since January 2012
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