Written by Eurekahedge

Key highlights for November 2015:

• Hedge funds are up 2.45% for the year, with the total AUM growing by US$110.7 billion in 2015. US$71.2 billion of the gain in assets are attributed to investor inflows and US$39.6 billion to performance-driven gains. This compares with an AUM growth of US$121 billion in 2014 where investor allocations stood at US$34.8 billion while performance-driven gains came in at US$86.2 billion.
• Almost 58% of hedge fund managers have posted positive returns in 2015, their lowest on record since 2011. Around 20% of the managers have posted gains in excess of 8% this year while around 15% of the managers have reported losses exceeding 8%.
• Asia-ex-Japan investing funds have delivered the best returns globally and are up 7.07% for the year. Assets managed by Asia-ex-Japan grew by US$9.6 billion as of 2015 year-to-date with US$4.7 billion attributed to investor inflows and US$4.9 billion attributed to performance-driven gains. Within the region, Greater China mandated hedge funds are up 9.45%, outperforming the CSI 300 Index by 8.52%.
• North American hedge funds have seen their assets grow by US$60.6 billion since the start of the year, with about 60% of the gain in assets attributed to investor inflows. However, performance has been lukewarm with North American mandated funds up 0.72% year-to-date – on track to post their worst returns since 2008.
• On a year-to-date basis, CTA/managed futures hedge funds have grown their asset base by 18%, recording their highest level of investor inflows on record since 2006 with net investor allocations worth US$27.8 billion. Total AUM for CTA/managed futures funds stand at US$241.1 billion, the highest level on record.
• Average performance and management fees charged by new launches in Europe this year stand at historic lows, with average performance fees declining to 13.91% while average management fees are down to 1.16%. For details refer to the this month’s 2015 Overview: Key Trends in European Hedge Funds report.

Hedge funds gained for the second consecutive month up 0.77% 1 in November outperforming underlying markets as represented by the MSCI AC World Index All Core 2, which gained 0.38% during the month. November was dominated by the theme of a US rate hike later in the year, along with the European Central Bank’s (ECB) dovish stance regarding further easing in the Eurozone. The latter has been to some extent realized earlier during the month when the ECB decided to cut deposit rates even further, adding to their menu an ever expansive array of negative yielding bonds on offer from countries otherwise plagued with anemic growth. It would be interesting to see how this easy credit and the simultaneous calls for reforms aka austerity will lead the Eurozone onto firmer grounds. Meanwhile markets struggled with soft PMI data from China which led commodity markets further into the red. Oil prices remained under pressure during the month despite rising inventories, and it is unlikely that OPEC may be reducing production in the near term – especially with Saudi Arabia and Russia/Iran embroiled in a proxy war in Syria where the latter are likely to gain more from any price increase.

October and November 2015 returns across regions

All regional mandates were up this month – Europe and Japan focused hedge funds lead the tables with gains of 0.82% each. Japanese hedge funds posted positive performance on the back of improved investor sentiments with positive Q3 economic growth as well as commitment from the Bank of Japan (BoJ) to meet its inflation target. Japanese equity markets have also performed well during the month with the Nikkei 225 and the Tokyo Topix both up 3.48% and 1.42% respectively. European managers also posted positive performance during the month with gains of 0.82% backed by positive equity market performance, optimism on the ECB stimulus measures and positions in the EUR/USD currency pair. The DAX and CAC both posted gains during the month, up 4.90% and 1.22% respectively.

North American managers came in third with gains of 0.61% despite some temporary volatility after FOMC comments on the rate hike earlier in the month; nonetheless the American equity markets indexes ended the month in positive territory. In Latin America, managers have posted gains of 0.44% this month with renewed optimism in the region on the back of current political events. The Argentinean MERVAL has reflected investor optimism following the recent elections gaining 4.09% during the month, thus benefiting hedge funds with long exposure to some Argentinean equities. Over in Venezuela, upcoming elections in December have also signalled towards a more pro-market government, leading to the possibility of a shift in regional economic policies. Meanwhile, the gusto surrounding strong performance of Asia ex-Japan hedge funds seemed to have quietened down with managers posting modest gains of 0.26% during the month as equity performance in the Greater China regio n proved to be mixed at best. The Hang Seng Index declined 2.84% while most mainland Chinese equities ended the month in positive territory.

On a year-to-date basis, gains made in early 2015 saw Asia ex-Japan managers leading the tables, up 7.07% followed by Japanese and European managers with gains of 6.25% and 4.96% respectively. North American hedge fund managers while also in positive territory had to contend with year-to-date gains of 0.72%. Latin American managers were up 0.67% over the same period.

2015 year-to-date returns across regions

Mizuho-Eurekahedge Asset Weighted Index

The asset weighted Mizuho-Eurekahedge Index fell in November, down 0.27%. It should also be noted that the Mizuho-Eurekahedge Index is US dollar dominated, and during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies. The US Dollar Index was up was up 3.33% in November.

Performance was mixed across the board among the suite of Mizuho-Eurekahedge Indices; the Mizuho-Eurekahedge Asia Pacific Index led the tables during the month with gains of 0.66%, followed by the Mizuho-Eurekahedge TOP 100 Index with gains of 0.03% over the same period. On a year-to-date basis, the Mizuho-Eurekahedge Asia Pacific Index maintained the lead, gaining 3.56% followed by the Mizuho-Eurekahedge TOP 100 Index which was up 1.18%. On the other hand, the Mizuho-Eurekahedge Emerging Market Indexperformed the worst with losses of 8.32%. The US Dollar Index has gained 10.97% on a year-to-date basis.

Mizuho-Eurekahedge Indices

November 2015 returns

Mizuho-Eurekahedge Indices

November 2015 year-to-date returns

CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprises four equally-weighted volatility indices – long volatility, short volatility, relative value and tail risk. The CBOE Eurekahedge Long Volatility Index is designed to track the performance of underlying hedge fund managers who take a net long view on implied volatility with a goal of positive absolute return. In contrast, the CBOE Eurekahedge Short Volatility Index tracks the performance of underlying hedge fund managers who take a net short view on implied volatility with a goal of positive absolute return. This strategy often involves the selling of options to take advantage of the discrepancies in current implied volatility versus expectations of subsequent implied or realised volatility.

The CBOE Eurekahedge Relative Value Volatility Index on the other hand measures the performance of underlying hedge fund managers that trade relative value or opportunistic volatility strate gies. Managers utilising this strategy can pursue long, short or neutral views on volatility with a goal of positive absolute return. Meanwhile, the CBOE Eurekahedge Tail Risk Index tracks the performance of underlying hedge fund managers that specifically seek to achieve capital appreciation during periods of extreme market stress.

During the month of November, the CBOE Eurekahedge Short Volatility Index led the tables with gains of 1.10% followed by the CBOE Eurekahedge Relative Value Volatility Index which gained 0.52%. The CBOE Eurekahedge Long Volatility Index and the CBOE Eurekahedge Tail Risk Volatility Index gained 0.41% and 0.07% respectively. On a year-to-date basis, the CBOE Eurekahedge Relative Value Volatility Index is up 5.49% followed by the CBOE Eurekahedge Short Volatility Index which has gained 2.69% followed by the CBOE Eurekahedge Long Volatility Index which gained 0.69%. The CBOE Eurekahedge Tail Risk Volatility Indexposted year-to-date losses of 3.33%.

CBOE Eurekahedge Volatility Indexes

 November 2015 returns

CBOE Eurekahedge Volatility Indexes

 November 2015 year-to-date returns

Summary monthly asset flow data since January 2012

1 Based on 41.72% of funds which have reported November 2015 returns as at 10 December 2015

2 MSCI AC World Index All Core (Local)

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