The Eurekahedge Hedge Fund Index was down 0.05%1 in October 2020, outperforming the global equity market as represented by the MSCI ACWI (Local), which lost 2.29% over the same period. The reimposition of national lockdowns across Europe, uncertainty in the outcome of the US presidential election, and the breakdown in US fiscal stimulus talks, resulted in the negative performance of global equities during the month. The acceleration of daily COVID-19 cases in Europe forced the authorities to reimpose restrictive measures to curb the increasing number of new infections, which acted as a headwind to the performance of the equity market in the region. The DAX underperformed its peers by ending the month of October down 9.44%, while the FTSE100 plunged 4.92%. Over in the US, uncertainty in the recent presidential election combined with the delay of the new federal coronavirus relief package dented market risk sentiments in the region. The US equity benchmarks were also down but fared better compared to their European peers. The S&P500 and tech-heavy NASDAQ retreated 2.77% and 2.29% throughout the month. Returns were mixed across geographic mandates in October, with Asia ex-Japan fund managers up 1.16%, while European fund managers were down 0.78%. North American fund managers were also up 0.34% in October, despite the decline in risk assets in the region during the month. Across strategies, event driven, arbitrage and distressed debt fund managers were up 0.87%, 0.62% and 0.23% respectively throughout the month.
Final asset flow figures for September showed that hedge fund managers recorded performance-based losses totalling US$16.4 billion and net investor redemptions of US$22.7 billion throughout the month. Preliminary data for October estimates that the global hedge fund industry witnessed US$8.0 billion of performance-driven losses combined with US$6.5 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,136.2 billion as of end-October 2020. The global hedge funds industry has seen US$65.5 billion of performance based decline and US$100.9 billion of investor redemptions over the first 10 months of 2020.
Figure 1a: Summary monthly asset flow data since January 2013
Key highlights for October 2020:
- Global hedge funds were down 0.05% in October, outperforming the global equity market by 2.24% for the second consecutive month. In year-to-date terms, the Eurekahedge Hedge Fund Index was up 3.25%, compared to -3.29% of the MSCI ACWI, with around 70% of the constituents of global hedge funds outperforming the global equity market in 2020.
- Assets under management for the global hedge funds industry have rebounded, increasing by US$97.7 billion over the seven months ending October 2020. This has come from performance-driven gains of US$127.7 billion partially offset by net investor outflows of US$15.0 billion. This marks a sharp recovery following a US$264.1 billion asset decline in Q1 2020.
- The Eurekahedge North American Hedge Fund Index was up 0.34% in October, outperforming the S&P 500 and NASDAQ by 3.10% and 2.63% respectively. In terms of year-to-date returns, North American hedge funds were up 4.39%, outperforming their European counterparts who were down 2.29% over the first 10 months of the year.
- The Eurekahedge Greater China Hedge Fund Index was up 1.69% in October, supported by the positive performance of the Hang Seng Index and CSI 300 which gained 2.76% and 2.35% respectively. On a year-to-date basis, the Greater China mandates are up 21.28%, outperforming their Asian peers who generated 7.54% over the first 10 months of the year.
- The Eurekahedge Long Short Equities Market Hedge Fund Index was up 0.08% in October, outperforming the MSCI ACWI which was down 2.29%. Supported by the strong performance of the equity market since end-March, long/short equities hedge funds were up 4.79%, with more than 30% of its constituents having generated a double-digit return over the first 10 months of 2020.
- The Eurekahedge Emerging Market Hedge Fund Index was up 0.57% during the month, supported by the positive performance of the developing equity market as represented by the 1.14% return of the MSCI Emerging Market IMI. In terms of year-to-date returns, the emerging market long/short equities funds were up 8.78%, outperforming their developed market counterparts in North America and Europe who returned 6.28% and -2.08% respectively as of October 2020.
- Hedge fund managers utilising arbitrage strategies were up 0.67% in October, outperforming most of their major strategic peers over the month, with macro and multi-strategy hedge funds down 0.83% and 0.42% respectively. On a year-to-date basis, arbitrage focused hedge funds also consistently outperformed their peers as they gained 6.66%, compared to 3.67% and 0.68% of macro and multi-strategy hedge funds over the first 10 months of 2020.
- Hedge funds utilising structured credit strategies were up 0.70% during the month, recording their seventh consecutive month of positive returns, which accumulated to 18.18% since end-March as captured by the Eurekahedge Structured Credit Hedge Fund Index. In terms of year-to-date returns, structured credit hedge funds were down 7.83% as of October 2020, underperforming their fixed income and distressed debt peers who returned 0.80% and -0.95% respectively.
- Fund managers focusing on cryptocurrencies were up 14.88% in October as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index underperforming the performance of Bitcoin which was up 26.10%. Looking at year-to-date return, cryptocurrencies hedge funds are up 89.25%, slightly ahead compared to the 87.19% return of Bitcoin over the first 10 months of 2020.
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