Research

Asset Flows Update

Introduction

The Eurekahedge Hedge Fund Index gained 0.42% in September1 while underlying markets as represented by the MSCI World Index2 were up 2.17% over the same period. Among regional mandates, Japanese managers posted the best gains with 1.72% during the month followed by Asia ex-Japan and Latin American hedge funds with returns of 1.25% and 1.15% respectively. Across strategies, long/short equity hedge funds led the table with gains of 1.46% followed by event driven hedge funds, up 0.80%.

Final asset flow figures for August 2017 revealed that managers reported performance-based gains of US$12.6 billion while recording net asset inflows of US$8.1 billion. Preliminary data for September shows that managers have posted performance-based gains of US$13.0 billion. Preliminary net asset flows were negative in September as managers witnessed investor’s redemptions for the month, seeing a total of US$2.8 billion in outflows from the industry. This brings the current assets under management (AUM) of the global hedge fund industry to a total of US$2.38 trillion.

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

 

Key highlights for September 2017:

  • Hedge funds were up 0.42% in September, with 2017 year-to-date gains coming in at 5.53%. Total hedge fund assets grew by US$157.52 billion over the past nine months with US$83.1 billion attributed to investor inflows while managers posted performance-based gains of US$74.4 billion. The industry’s total assets currently stands at US$2.38 trillion.
  • Long/short equities mandated hedge funds led the table for the month with gains of 1.46%. On a year-to-date basis, Long/short equities hedge fund managers also topped the tables gaining 9.00%. Year-to-date investor allocations for long/short equities hedge funds currently stands at US$18.9 billion, the highest year-to-date net inflows among strategic mandates this year.
  • CTA/managed futures hedge funds dropped 1.37% this month and down 0.76% year-to-date, the mandate’s worst year-to-date returns on record with its sub-group of commodity focused strategies down 1.22% while trend following strategies declined 3.10%. CTA/managed futures managers posted performance-based losses totaling US$7.1 billion this year while net inflows totaling US$12.7 billion were recorded over the same period.
  • Insurance-linked securities (ILS) hedge funds registered losses of 5.08% in September and down 3.29% year-to-date as managers portfolio was affected by US hurricane exposure. Losses for ILS hedge fund managers were limited though on account of the diversification they build in within their portfolios across various geographies and types of perils. While some funds have already posted losses in August and September, the full degree of damage from Harvey, Irma and Maria would only truly reveal itself in the coming months.
  • New fund launches activity have been slowing down, with 421 launches over the first three quarters of 2017 which compares to 543 and 658 launches over the same period in 2016 and 2015 respectively. Meanwhile pressure on fees remains with the average new fund startup charging 16.9% of performance fees, down from 18.2% last year as increasing competition within the hedge fund industry continues.
  • The US$543.0 billion European hedge fund industry grew its AUM by US$37.1 billion as of September 2017 year-to-date, following a steep contraction in AUM of US$27.0 billion in 2016. Managers investing with a dedicated European mandate were up 5.89% for the year following a flat gain of 0.25% in 2016. 
  • As of September 2017 year-to-date, Asian funds have recorded a growth in AUM of US$16.23 billion, with US$10.8 billion accounted for by performance based gains while the remainder, roughly US$5.4 billion has come through net investor allocations. Asia ex-Japan managers are up 14.87% for the year, leading the table among strategic mandates with underlying Greater China and Indian managers up 22.16% and 19.36% year-to-date respectively. Japan focused funds are up 8.83% over the same period.
  • Strong investor inflows were recorded since the start of the year for the US$1.59 trillion North American hedge funds industry with total investors allocations for 2017 year-to-date stood at US$51.2 billion. A total of US$4.1 billion outflows were recorded on the same period last year ending September. For more details, please refer to the North American Hedge Funds Key Trend Report September 2017.

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Footnote
1 Based on 45.97% of funds which have reported September 2017 returns as at 12 October 2017
2 MSCI AC World Index (Local)
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