Research

Asset Flows Update

The Eurekahedge Hedge Fund Index was up 1.06%1 in March, wrapping the first quarter of the year gaining 4.36% year-to-date. Hedge fund managers narrowly trailed behind the global equity market as represented by the MSCI AC World Index2 which gained 1.09% in March. The global equity and bond markets have rallied through the first quarter of 2019, supported by the dovish stance exhibited by major central banks, as well as the optimism over the US-China trade negotiations. On the other hand, concerns over slowing economic growth have persisted through the quarter, with growth forecasts being cut. The majority of hedge fund managers tracked by Eurekahedge recorded positive returns in March, with those focusing on Asia ex-Japan countries posting strongest gains. Despite the positive performance exhibited by hedge fund managers, investor appetite remained muted as the industry saw net investor outflows throughout the month.

Final asset flow figures for February showed that hedge fund managers generated performance-based gains totalling US$12.4 billion, offset by investor redemptions of US$17.5 billion. Following a similar trend, preliminary data for March showed that the industry saw US$9.8 billion of performance-driven gains, counterbalanced by US$8.0 billion of net investor outflows. The assets under management (AUM) of the global hedge fund industry stood at US$2,315.0 billion as of March 2019, up roughly 1.0% year-to-date, in contrast to how the industry lost 6.3% of its assets in 2018. On a year-to-date basis, the industry has seen US$55.0 billion of performance growth and US$32.3 billion of investor redemptions over the first quarter of 2019.

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

Key highlights for March 2019:

  • The Eurekahedge Hedge Fund Index gained 1.06% in March, bringing its year-to-date return to 4.36% – the strongest Q1 performance of the hedge fund industry since the global financial crisis. Roughly half of the hedge fund managers tracked by Eurekahedge have recovered the losses they suffered last year.
  • The global hedge fund industry AUM has grown by US$22.7 billion as of March 2019 year-to-date. Redemption pressure eases as quarter-on-quarter investor flows from the hedge funds industry dropped by 65.9%. Investors redeemed US$32.3 billion in Q1 2019, compared to US$94.7 billion in Q4 2018.
  • The Eurekahedge CTA/Managed Futures Hedge Fund Index gained 2.66% in March, supported by the recovering oil prices resulting from OPEC’s production cut and declining US inventory levels. On a year-to-date basis the mandate has returned 2.76%.
  • Hedge fund managers focusing on Asia ex-Japan were up 2.04% in March, with strong returns registered by long/short equities hedge funds in the region. On a year-to-date basis, the Eurekahedge Asia ex Japan Hedge Fund Index has gained 7.21%, supported by the recovery of Asian equity and bond markets in the first quarter of the year. The underlying Greater China and India mandates were up 12.27% and 6.46% respectively as of March 2019 year-to-date.
  • Fund managers utilising AI/machine learning strategies gained 2.59% in March, bringing their year-to-date returns to 3.93%. Quant strategies continued to fall out of investors’ favour, with the CTA/managed futures mandate seeing investor outflows totalling US$7.5 billion as of March 2019 year-to-date, and US$29.0 billion throughout 2018.
  • The Eurekahedge Crypto-Currency Hedge Fund Index gained 13.56% in March, bringing their year-to-date return up to 13.78%. Crypto hedge fund managers have successfully outperformed Bitcoin, which was up 8.17% in March and 5.58% throughout the first quarter of 2019.
  • The Eurekahedge Custom Asia Top Gainer Composite, an equal-weighted custom index comprising some of the best performing hedge funds focusing on the Asia Pacific region was up 7.77% in 2018, outperforming the Eurekahedge Asian Hedge Fund Index which declined 8.71% over the same period. The index, representing US$13.0 billion of AUM has generated a Sharpe ratio of 2.80 (RFR = 2%) over the last five years, vastly outperforming the average Asian hedge fund and the region’s underlying equity markets. For more on this, refer to the Strategy Profile section of the Eurekahedge April 2019 report.

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Footnote
1 Based on 42.83% of funds which have reported March 2019 returns as at 11 April 2019 
2 MSCI AC World Index All Cap (Local)
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