Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index gained 0.41% in November1 while underlying markets as represented by the MSCI World Index2 grew 2.88% over the same period. Among regional mandates, North American managers led the table, up 2.28% during November followed by Japan managers with 1.16% gains. Across strategies, event driven hedge funds led with 1.85% growth followed by distressed debt hedge funds which grew 1.69%.

Final asset flow figures for October revealed that managers reported performance-based losses of US$2.5 billion while recording net asset outflows of US$11.6 billion. Preliminary data for November shows that managers have posted performance-based losses of US$1.0 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$2.23 trillion.

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

Key highlights for 2016:

  • Hedge funds are up 3.53% for the year, posting better performance compared to a modest 1.73% gain over the last year. Asset base for the industry contracted US$10.4 billion in 2016, on the back of steep redemption pressure with net outflows totalling US$28.2 billion for the year.
  • Almost 13% of billion dollar hedge funds posted double-digit gains in 2016, compared to 8% in 2015. Among the sub-billion dollar hedge funds, almost 20% returned double-digit performance compared with 17% in 2015.
  • While billion dollar hedge funds have seen their asset base decline by US$32.3 billion in 2016, their smaller peers, the sub-billion dollar funds have seen their combined AUM grow by US$21.9 billion. In particular, funds in the US$250 to US$500 million AUM bracket have seen investor subscriptions of US$8.8 billion, up from US$5.1 billion the year before.
  • Relative value mandated hedge funds posted the best growth in assets, expanding close to 20% for the year, with underlying relative value volatility hedge funds posting impressive gains of 7.18% in 2016. More details on volatility-focused hedge funds are available here.
  • CTA/managed futures mandated hedge funds have attracted US$11.5 billion in capital this year despite mixed returns among its sub-strategies with commodity focused managers gaining 7.72% for the year, outperforming trend-following and FX-focused managers which declined 1.68% and 2.60% for the year respectively.

  • European hedge funds have fared the worst among regional mandates witnessing their AUM decline by US$21.6 billion in 2016. Liquidations have also outpaced launches in the European hedge fund space consistently for the past 7 quarters with 569 fund shutting down since 2015. More details in the 2016 Overview: Key Trends in European Hedge Funds report.

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Footnote
1Based on 55.61% of funds which have reported November 2016 returns as at 14 December 2016
2 MSCI AC World Index (Local)
 
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