The Eurekahedge Hedge Fund Index was up 0.26%1 in June, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 1.93% over the same period. Covid-related mobility restrictions in most developed markets continued to be progressively relaxed as vaccination rates rise, providing support to the reopening of their economies. The swift rebound in economic activity led to higher inflation in some countries, most notably in the United States where in June, the US consumer price index increased by 5.4% year-on-year – the sharpest 12-month inflation spike since August 2008. This has led to fears that the higher inflation figure could compel the Federal Reserve to tighten monetary policy earlier than expected. Although the Federal Reserve considers the rise in inflation to be transitory, they have started to discuss the possibility of rate hikes with the median FOMC participant expecting two rate hikes in 2023. The S&P 500 and NASDAQ closed the first half of 2021 at or near record highs, rising by 2.22% and 5.49% in June respectively, supported by the rebound in economic activity as more people return to work. Over in Europe, returns were mostly positive among equity benchmarks in the region with the CAC 40 and DAX index taking the lead with gains of 0.94% and 0.71% respectively. Returns were mostly positive across geographic mandates in June with Latin American and North American hedge funds in the lead with returns of 1.47% and 1.13% respectively while European hedge funds were down 0.17%. Across strategies, distressed debt, multi-strategy and long/short equities outperformed their strategic peers with returns of 1.93%, 0.73% and 0.72% respectively throughout the month.
Final asset flow figures for May showed that hedge fund managers recorded performance-based gains totalling US$17.0 billion on top of net investor allocations of US$32.4 billion throughout the month. Preliminary data for June estimates that the global hedge fund industry witnessed US$3.5 billion of performance-driven losses combined with US$4.1 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2385.2 billion as of June 2021. The global hedge funds industry has seen US$84.7 billion of performance-based gains and US$52.0 billion of investor allocations throughout in 2021.
Figure 1a: Summary monthly asset flow data since January 2013
Key highlights for June 2021:
- Hedge fund managers were up 0.26% in June, trailing behind the global equity market as represented by the MSCI ACWI (Local) which gained 1.93% during the month. In terms of 2021 performance, global hedge funds were up 8.09%, recording the strongest June year-to-date return since 2009 despite the ongoing pandemic. Roughly 58.2% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in June, and 30.6% of the hedge fund managers in the database were able to maintain a double digit return in 2021.
- On an asset-weighted basis, hedge funds were down 1.09% in June, as captured by the Eurekahedge Asset Weighted Index – USD. In terms of 2021 performance, the index is only up 3.64%, highlighting the struggles for some of the larger asset managers over the year.
- The Eurekahedge North American Hedge Fund Index was up 1.13% in June, supported by the strong performance of the S&P 500 and NASDAQ which returned 2.22% and 5.49% respectively. In terms of 2021 performance, North American hedge funds have returned 11.54%, outperforming their regional peers as the economy continues its reopening and more and more people are returning to work.
- The Eurekahedge Indian Hedge Fund Index was up 2.14% in June, outperforming the BSE SENSEX index which gained 1.05% over the month. Despite the stubbornly high numbers of new COVID-19 cases in India driven by the Delta variant, the OECD has projected India's economy to expand by 9.9% and become the fastest-growing G20 economy in 2021. In terms of 2021 performance, Indian hedge funds were up 15.44%, outperforming their Greater China counterparts which returned 5.89% over the first six months of 2021.
- The Eurekahedge Distressed Debt Hedge Fund Index gained 1.93% in June, outperforming all of their main strategic peers. In terms of 2021 performance, distressed debt hedge funds have returned 10.56%, recording their best June year-to-date return since 2009.
- The Eurekahedge Long Short Equities Hedge Fund Index was up 0.72% in June, extending their streak of consecutive positive returns to nine months. In terms of 2021 performance, long/short equities hedge funds have returned 10.53%, recording their strongest June year-to-date return since 2009.
- Fund managers focusing on cryptocurrencies were down 10.45% in June as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, trailing behind Bitcoin which gained 0.55% over the same period. In terms of 2021 return, cryptocurrency hedge funds have gained 82.95%, outperforming Bitcoin which returned 24.95% over the first six months of the year.
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