Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index declined 0.48% in October1 outperforming underlying markets as represented by the MSCI World Index2 which was down 1.38% over the same period. Among regional mandates, Latin American managers led the table, up 4.07% during the month followed by Japan managers who gained 2.28%. Across strategies, distressed debt hedge funds led the table with gains of 1.96% followed by fixed income hedge funds which were up 0.51%.

Final asset flow figures for September revealed that managers reported performance-based gains of US$5.2 billion while recording net asset outflows of US$8.3 billion. Preliminary data for October shows that managers have posted performance-based losses of US$3.0 billion while recording net outflows of US$8.4 billion, bringing the current assets under management (AUM) of the global hedge fund industry to a total of US$2.25 trillion.

Figure 1a: Summary monthly asset flow data since January 2012
 

Key highlights for October 2016:

  • Hedge funds were up 2.85% for the year, on track for a better showing compared to 2015 when the average fund realised modest gains of 1.65%. Asset growth for the industry remains muted in 2016, expanding by US$1.7 billion, a sharp detraction from the US$102.5 billion growth seen in 2015.
  • While hedge fund capital allocations are in the red for 2016 with outflows of US$16.6 billion for the year, investor subscriptions have favoured CTA/managed futures, multi-strategy and relative value strategies which have seen inflows of US$12.2 billion, US$5.4 billion and US$4.0 billion respectively.
  • Hedge funds managing in excess of US$1 billion have seen their asset base decline by close to 2% over the year, with redemptions of US$27.0 billion while performance-based gains stood at US$7.3 billion. In contrast, sub-billion dollar funds have fared relatively better with inflows of US$10.4 billion and performance-based gains of US$11.0 billion.
  • Asset base for the US$1.49 trillion North American hedge fund industry grew by US$12.1 billion over the year with most of this growth attributed to performance-based gains (US$18.6 billion year-to-date) while redemptions totalling US$6.5 billion were recorded over the same period.
  • The US$524.5 billion European hedge fund industry has seen its asset base contract by US$10.7 billion year-to-date, with managers seeing strong investor redemptions totalling US$7.4 billion over the 10 months. The Eurekahedge European Hedge Fund Index lost 0.65% year-to-date.

  • Net flows for Asia ex-Japan mandated hedge funds went in the red for the year following steep redemptions worth US$2.1 billion in October – the highest monthly redemption on record since July 2012. Overall asset growth for Asian mandates is in the red for the year following disappointing returns from Japan (down 0.92%) and Greater China (down 2.15%).

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Footnote
1Based on 39.14% of funds which have reported October 2016 returns as at 14 November 2016
2 MSCI AC World Index (Local)
 
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