Hedge Fund AUM Hits Another Record Amid 4.2% Returns, $71B In Inflows

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The September 2014 Eurekahedge Report has been released

  • Hedge funds are up 4.16% year-to-date, registering performance-based gains of US$52.2 billion while seeing net asset inflows of US$70.9 billion in 2014.


  • Assets under management of UCITS hedge funds have reached a record high of US$275.2 billion.


  • Asia ex-Japan hedge funds are on track to outperform their global peers yet again and are up 7.26% year-to-date.


  • European hedge funds have seen their AUM grow by 8.63% this year, attracting US$32.2 billion in net asset flows as at August 2014 year-to-date despite muted returns of 1.41% over the same period.


  • Long/short equity funds lead in terms of capital raising with net asset inflows of US$60 billion, followed by US$16 billion for fixed income and US$13 billion for event driven strategies year-to-date.


  • CTA/managed futures hedge funds delivered the best return among all strategies in July, up 2.41% and 4.53% year-to-date though investors have redeemed US$12 billion from the strategy in 2014 alone.


  • India investing hedge funds continue to record strong gains, reporting their seventh consecutive month of positive returns – up 2.54% and 28.52% year-to-date.


Performance update


Hedge funds rebounded strongly in August to close the month up 1.30%[1], trailing underlying markets as the MSCI World Index[2] gained 2.48% on the back of modest growth figures which were driven largely by an improving outlook for the US economy. August witnessed another renewed wave of investor optimism which continued to push global equity markets higher and volatility back down. The divergence in economic policies between the US and European central banks was quite a major theme during the month, with the ECB embarking on its quantitative easing program in earnest even as the Fed debates over the timing of future interest rate hikes, leaving the euro reeling while driving the dollar higher. Markets in Greater China and Japan ended the month flat to slightly negative as macroeconomic numbers from China pointed towards a slowdown in the economy but was seen to prompt more stimulus measures from the Chinese government.


July and August 2014 returns across regions



Latin American managers were the best performers during the month, returning 2.20%. Managers investing with a Brazilian mandate were the star performers in the region as underlying equity markets saw a sharp rally in anticipation of the upcoming elections. North American hedge funds gained 1.68%, buoyed by strong tailwinds as the S&P 500 rose 3.77%. On the other hand, the Eurekahedge European Hedge Fund Index was the weakest regional mandate, gaining only 0.34% as the region was plagued by persistently weak growth and inflation figures on top of the deteriorating geopolitical tensions in Ukraine. The Russian RTS Stock Index fell another 2.39% during the month. Japanese managers came in second-to-last place with gains of 0.79%, though outperforming the Nikkei 225 Index which saw losses of 1.26% in August.


On a year-to date-basis, Asia ex-Japan managers lead the table with returns of 7.26%, attributing much of their gains to exposure to Indian equities, which has risen 25.83%[3] since the start of the year. Funds with a Latin and North American mandate vied for second place, delivering returns of 5.93% and 5.63% respectively. Japan focused funds returned 2.21% while European managers came in last place at 1.41%.


2014 year-to-date returns across regions




Mizuho-Eurekahedge Asset Weighted Index


The asset weighted Mizuho-Eurekahedge Index was up 0.95% in August. The top 100 constituents performed roughly in line with their smaller counterparts, gaining 1.02%. It should be noted that the Mizuho-Eurekahedge Index is US dollar denominated and as such during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies.


The asset weighted Mizuho-Eurekahedge Emerging Markets Hedge Fund Index posted the largest gain of 2.51%, outperforming the MSCI Emerging Markets Index[4] which rose 1.80%. Latin American equities rose strongly during the month, with the Brazil IBOVESPA gaining 9.78%. As at August 2014 year-to-date, theMizuho-Eurekahedge Emerging Markets Hedge Fund Index has delivered total returns of 7.35%.


Asset flows update


Hedge funds ended August in positive territory with the Eurekahedge Hedge Fund Index up 1.30%[5] trailing the MSCI[6] World Index which gained 2.48%, with market volatility falling across the different asset classes. In the US, the economy continues to show modest growth, prompting more speculation regarding possible revisions to the schedule for the Fed’s eventual raising of interest rates. Over in the Eurozone, inflation and growth remains weak, spurring Draghi into action to fulfil his commitment towards fighting deflation. European equities rallied in anticipation of a fresh round of quantitative easing, with regional markets ending the month largely in positive territory.


Final asset flow figures for July revealed that managers reported performance-based losses of US$5.0 billion while recording net asset outflows of US$4.8 billion as hedge funds saw their largest monthly decline in assets under management (AUM) as at 2014 year-to-date. Preliminary data for August shows that managers have posted performance-based gains of US$12.9 billion while recording net outflows of US$0.2 billion, bringing the current AUM of the global hedge fund industry to a total of US$2.14 trillion –  the highest level on record.


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