News & Events

2019 Key Trends in Global Hedge Funds

Introduction

The Eurekahedge Hedge Fund Index was up 3.28% as of February 2019 year-to-date as the industry recovered from the losses suffered in 2018. Last year, hedge funds recorded their worst annual performance since the 2008 global financial crisis as the escalation of the US-China trade war, aggressive rate hikes from the US Federal Reserve, and concerns over slowing global growth weighed on global equities. Going into 2019, the risk sentiment had improved due to the progress of the US-China trade negotiations, which showed that both parties are serious in resolving the conflicts between their trade and industrial policies. Meanwhile, the Federal Reserve adopted a patient wait-and-see stance regarding their rate policies since the beginning of the year, as a response to the muted inflation following the sharp decline of oil prices in Q4 2018. Over in Asia, Chinese authorities also deployed fiscal stimulus programmes through tax and reserve requirement ratio cuts in order to support their slowing economy. These events acted as much-needed tailwinds to the equity markets around the globe over the first two months of 2019, during which the S&P 500 and the DJIA gained 11.39% and 11.10%. Meanwhile, China’s mainland stock exchange benchmarks – the Shanghai and Shenzhen Composite Indices rallied 17.93% and 21.96% respectively over the same period.

Looking at Europe, uncertainties surrounding Brexit negotiations and the manufacturing sector slowdown remained as the key themes over the first few months of 2019. In reaction to the muted growth, the ECB adopted an even more dovish stance to support the region’s economy by issuing a new round of refinancing programme not long after they ended their asset purchasing programme last year. Meanwhile in the commodity market, the oil prices had strengthened throughout the first quarter of the year, thanks to the supply disruption from OPEC’s production cut and US sanctions on Venezuela, as well as declining US crude inventories.

Figure 1: Global hedge fund industry map
 

The industry’s total assets under management (AUM) grew by US$24.4 billion as of February 2019 year-to-date, thanks to the strong performance-based gains posted by fund managers in January and February. Meanwhile, investor’s appetite toward hedge funds remained muted, with redemptions totalling US$15.1 billion recorded over the same period.

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