Introduction
Hedge funds posted their sixth month of negative returns for the year, with the Eurekahedge Hedge Fund Index down 0.27%1, underperforming underlying markets as the MSCI World Index2 climbed 1.15% after a major worldwide selloff and subsequent recovery. In the US, the Federal Reserve completed its tapering program this month and announced that it is still on track towards normalising interest rates given its inflation and employment targets. Over in Asia, the Bank of Japan (BoJ) surprised market participants by going all out to tackle deflation and embarking on further easing, driving the yen to new lows against the greenback while sparking off another rally in the Nikkei.
Final asset flow figures for September revealed that managers reported performance-based gains of US$0.9 billion while recording net asset outflows of US$9.8 billion. Preliminary data for October shows that managers have posted performance-based gains of US$3.8 billion while recording net outflows of US$4.9 billion, bringing the current assets under management (AUM) of the global hedge fund industry to a total of US$2.13 trillion - close to the record US$2.14 trillion reported last quarter.
Figure 1: Summary monthly asset flow data since January 2011
Key highlights for October 2014:
- Hedge funds are up 3.45% year-to-date with roughly 18% of funds boasting double digit returns for the year, half the number for the same period last year.
- Total net asset flows for 2014 were trimmed to US$55 billion for the year as hedge funds saw their fourth consecutive month of net outflows in October, with investors redeeming US$20.3 billion over the last four months.
- CTA/managed futures funds reported performance-based gains of US$13.2 billion for the year; their highest October year-to-date gains since 2010. North American CTAs are up 8.04% year-to-date, their best performance in the last three years.
- Asia ex-Japan focused funds grew their asset base by US$11.2 billion in 2014, and are up 7.44% October year-to-date, outperforming the MSCI Asia ex Japan by almost 300 basis points.
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