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Index Flash Update - 12 January 2021

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Hedge funds recorded their best annual performance since 2009 despite the ongoing pandemic

The Eurekahedge Hedge Fund Index was up 3.41% in December 2020, supported by the strong performance of the global equity market as represented by MSCI ACWI (Local) which gained 4.04% during the month. In 2020, global hedge funds ended the year in double-digit performance with 11.77% return, recording their best annual performance in over a decade, despite the ongoing pandemic crisis. In the earlier months of 2020, the widespread of COVID-19 forced non-essential businesses to temporarily cease their operations. This in turn caused a shutdown of broader economic activity resulting in the sharp increase in unemployment rate.

Unemployment rate reached 14.8% in April 2020 in the US – a level that has not been seen since the Great Depression. However, risk assets made a strong comeback since end-March, supported by the massive economic stimulus, low-interest rates, reopening of the major economies, and positive development of COVID-19 vaccines which boosted the performance of the global equity market. Over the month of December, global hedge funds benefitted from the strong rally of risk assets driven by the deployment of several COVID-19 vaccines and the passage of the new COVID-19 relief bill in the US, which was the second-largest economic stimulus in American history. In the US, NASDAQ Composite was up 5.65% in December, bringing its 2020 return to 43.64% compared to 19.30% of S&P 500. The tech-companies particularly the FAANG group strongly benefitted from the ongoing pandemic as seen from the 80.75% return of AAPL throughout the year. In the same vein, the post-Brexit trade agreement between the UK and EU boosted the performance of the equity market in the region, with the DAX gaining 3.22% during the month, while the FTSE100 returned 3.10% over the same period respectively.

Returns were positive across geographic mandates in December with North American hedge funds gaining 3.99%, outperforming their Asia ex-Japan and European peers who returned 3.26% and 2.39% respectively. Across strategies, CTA/managed futures, long/short equities, and event-driven fund managers were up 4.24%, 4.17%, and 3.66% respectively throughout the month

Roughly 88.0% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in December, and 40.0% of the hedge fund managers in the database were able to maintain double-digit returns throughout in 2020.

Below are the key highlights for the month of December 2020
  • Hedge fund managers were up 3.41% in December, underperforming the global equity market as represented by the 4.04% return of the MSCI ACWI (Local) during the month. On a year-to-date basis, hedge fund managers were up 11.77% in 2020, concealing their worst quarterly performance of 7.85% in the first quarter since the inception of the index. Around 32.9% of the constituents of the Eurekahedge Hedge Fund Index funds have outperformed the global equity market throughout the year.

  • On an asset-weighted basis, hedge funds were up 3.63% in December, as captured by the Eurekahedge Asset Weighted Hedge Fund Index (USD). The index is only up 4.59% year-to-date, highlighting the struggles for some of the larger asset managers this year.

  • The Eurekahedge Greater China Hedge Fund Index was up 3.67% in December, bringing its 2020 performance to 32.54% which marks its best annual performance since 2009. In the same vein, assets under management of the Greater China mandate increased from US$67.8 billion to US$88.0 billion since end-2019, attributed to both strong investor inflows and performance-based growth of US$7.8 billion and US$12.4 billion respectively.

  • The Eurekahedge Long Short Equities Hedge Fund Index was up 4.17% in December, which brings its accumulative return since end-March to 31.82%. In terms of year-to-date return, long/short equities mandate were up 16.68% - recording their strongest annual performance since 2009 and second consecutive year of double-digit performance.

  • Emerging market hedge funds gained 3.85% in December as captured by the Eurekahedge Emerging Market Hedge Fund Index. On a year-to-date basis, emerging market mandate outperformed their developed market counterparts as they returned 16.00%, compared to the 14.82%, 4.44% and 0.38% of the North American, European and Japanese mandate respectively .

  • The  Eurekahedge Structured Credit Hedge Fund Index was up 3.48% during the month, extending its nine-month trailing return to 24.57% since end-March. In terms of year-to-date return, structured credit hedge funds were down 2.95% as of December 2020, underperforming their fixed income and distressed debt peers who returned 5.38% and 4.02% respectively.

  • Fund managers focusing on cryptocurrencies were up 24.42% in December as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index , supported by the extraordinary performance of Bitcoin which ended the year at US$28,000 level – a far cry from its 2017 peaked. On a year-to-date basis, cryptocurrency hedge funds gained 194.23% compared to the 296.74% return of Bitcoin throughout the year.

 

Index of the Month Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Crypto-Currency Hedge Fund Index 25.42 194.23 15.56

Main Indices

Main Eurekahedge Indices Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Hedge Fund Index 3.41 11.77 8.91
Eurekahedge Fund of Funds Index 3.06 11.49 8.70
Eurekahedge Long-only Absolute Return Fund Index 5.20 13.04 16.51
Eurekahedge Islamic Fund Index 2.83 10.69 10.08

Regional Indices

Eurekahedge Regional Indices Dec
2020*
2020 Returns 2019 Returns
Eurekahedge North American Hedge Fund Index 3.99 14.82 9.31
Eurekahedge European Hedge Fund Index 2.34 4.44 7.41
Eurekahedge Eastern Europe & Russia Hedge Fund Index 7.55 -1.17 18.47
Eurekahedge Japan Hedge Fund Index 1.64 0.38 7.24
Eurekahedge Emerging Markets Hedge Fund Index 3.85 16.00 12.65
Eurekahedge Asia ex Japan Hedge Fund Index 3.26 21.53 12.01
Eurekahedge Latin American Hedge Fund Index 3.73 4.59 15.15

North American fund managers recorded a 3.99% gain in the month of December, increasing their year-to-date return to 11.77%. The deployment of the COVID-19 vaccines and passage of the new COVID-19 stimulus package in the US boosted the market risk sentiment throughout the month. In the same vein, European fund managers were up 2.34%, supported by the strong performance of the equity market in the region, with DAX up 3.22%.

Strategy Indices

Returns were positive across strategic mandates in December with equity long bias and CTA/managed futures mandates up 6.91% and 4.24% respectively, as the former was supported by the strong equity market performance after the deployment of several COVID-19 vaccines. On the other hand, long volatility and tail risk managers recorded 0.16% and -0.63% return respectively in December, which brings their year-to-date return to 23.57% and 32.23% respectively.

 

Table 1: Strategy return map

Eurekahedge Strategy Indices Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Arbitrage Hedge Fund Index 1.64 11.09 5.59
Eurekahedge CTA/Managed Futures Hedge Fund Index 4.24 8.11 5.51
Eurekahedge Distressed Debt Hedge Fund Index 0.64 4.02 4.33
Eurekahedge Event Driven Hedge Fund Index 3.66 6.32 6.89
Eurekahedge Fixed Income Hedge Fund Index 1.70 5.38 7.94
Eurekahedge Long Short Equities Hedge Fund Index 4.17 16.68 11.71
Eurekahedge Macro Hedge Fund Index 3.20 10.49 8.60
Eurekahedge Multi-Strategy Hedge Fund Index 2.38 7.26 8.59
Eurekahedge Relative Value Hedge Fund Index 2.19 9.47 4.96
CBOE Eurekahedge Long Volatility Hedge Fund Index 0.16 23.57 -10.87
CBOE Eurekahedge Relative Value Volatility Hedge Fund Index -0.24 6.07 -1.55
CBOE Eurekahedge Short Volatility Hedge Fund Index 0.99 0.30 8.32
CBOE Eurekahedge Tail Risk Hedge Fund Index -0.63 32.23 -10.40
Eurekahedge Equity Long Bias Hedge Fund Index 6.91 15.56 16.70
Eurekahedge Equity Market Neutral Hedge Fund Index 0.70 3.02 1.91
Eurekahedge Trend Following Index 8.01 12.90 6.03
Eurekahedge FX Hedge Fund Index 1.55 1.09 0.93
Eurekahedge Commodity Hedge Fund Index 5.05 11.64 7.49
Eurekahedge Crypto-Currency Hedge Fund Index 25.42 194.23 15.56
Eurekahedge AI Hedge Fund Index 3.09 11.92 6.29
Eurekahedge ILS Advisers Index 0.10 3.29 0.92
Eurekahedge Global Hedge Fund Indices by Fund Size Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Small Hedge Fund Index (< US$100m) 3.80 12.52 8.84
Eurekahedge Medium Hedge Fund Index (US$100m - US$500m) 3.29 11.49 8.97
Eurekahedge Large Hedge Fund Index (> US$500m) 2.43 6.79 8.90
Eurekahedge Billion Dollar Hedge Fund Index 2.14 5.42 8.58
Eurekahedge Asset Weighted Indices Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Asset Weighted Index – USD 3.63 4.59 6.97
Eurekahedge TOP100 Asset Weighted Index – USD 3.47 1.64 6.89
Eurekahedge TOP300 Asset Weighted Index - USD 3.49 3.20 7.09
Asia-Eurekahedge Indices Dec
2020*
2020 Returns 2019 Returns
Eurekahedge Greater China Hedge Fund Index 3.67 32.54 16.63
Eurekahedge India Hedge Fund Index 5.36 20.34 2.93


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