Asset Flows Update

The Eurekahedge Hedge Fund Index was up 0.89%1 in February, supported by the continued recovery of the global equity market which pushed the MSCI AC World Index2 3.03% higher. The majority of hedge fund managers tracked by Eurekahedge recorded positive returns in February, with those utilising long/short equities and event driven strategies outperforming other mandates. The patient wait-and-see approach to raising rates from the US Federal Reserve and optimistic anticipation over the potential resolution of the US-China trade war helped sustain the global equity market performance throughout the month. Apart from that, slowing economic growth across the globe has prompted central banks to raise concerns over lower inflation and cut their short-term growth forecasts, resulting in lower yields in the bond markets.

Final asset flow figures for January showed that hedge fund managers generated performance-based gains totalling US$32.8 billion, offset by investor redemptions of US$6.8 billion. Following a similar trend, preliminary data for February showed that the industry saw US$6.7 billion of performance-driven gains, counterbalanced by US$8.3 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,316.7 billion as of February 2019, up roughly 1.1% year-to-date, in contrast to how the industry lost 6.3% of its assets in 2018.

Figure 1a: Summary monthly asset flow data since January 2013

Key highlights for February 2019:

  • The Eurekahedge Hedge Fund Index gained 0.89% in February, bringing its year-to-date return to 3.26%. The risk-on sentiment among investors driven by the Fed’s patient stance and optimism over the potential resolution of the US-China trade tension persisted through the month, sending global equity markets on a rally through February.
  • The global hedge fund industry saw performance growth totalling US$39.5 billion over the first two months of 2019, supported by the global equity market performance since the beginning of the year. Despite the positive performance figures, net investor redemptions stood at US$15.1 billion over the same period.
  • The Eurekahedge Fixed Income Hedge Fund Index gained 0.61% in February, as growth forecast cuts among the developed economies led to lower bond yields, resulting in strength in the government and high-yield bond markets. The fixed income strategic mandate was up 2.29% year-to-date, with all of its underlying mandates in positive territory.
  • Hedge fund managers utilising CTA/managed futures strategies were up 0.37% in February, with mixed returns among the underlying regional mandates. Rising oil prices resulting from the OPEC’s production cut and a drop in the US crude supplies contributed to the strategy’s performance during the month. On a year-to-date basis, the Eurekahedge CTA/Managed Futures Hedge Fund Index was up a meagre 0.16%.
  • Fund managers utilising AI/machine learning strategies were down 0.32% in February, dragging their year-to-date returns to 2.02%. Quant strategies continued to fall out of investors’ favour, with the CTA/managed futures mandate seeing investor redemptions totalling US$29.0 billion in 2018 and US$4.0 billion as of February 2019 year-to-date.
  • The Eurekahedge Crypto-Currency Hedge Fund Index gained 12.74% in February, recording its best month in nearly a year. Roughly half of the underlying crypto-currency hedge funds managed to outperform Bitcoin which gained 9.65% during the month.
  • The Greater China hedge fund industry's asset currently stands at US$28.7 billion, marginally up from the US$28.0 billion figure by the end of 2018. Hedge fund managers focusing on the region were hit particularly hard by the aggressive Fed rate hikes and the US-China trade friction in 2018, as indicated by the US$2.3 billion of performance-based losses recorded during the year. Despite that, investor allocations toward the region remained robust, as the industry saw US$1.0 billion of net inflows in 2018.

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1 Based on 45.81% of funds which have reported February 2019 returns as at 13 March 2019
2 MSCI AC World Index (Local)