Eurekahedge: A Rough Time For The European Mandate Funds

Eurekahedge: A Rough Time for the European Mandate Funds

European hedge fund managers continue to suffer from the uncertainties of the United Kingdom’s impending exit from the EU. The latest report from Eurekahedge says that European hedge funds have posted losses in eight of the first eleven months of 2018. They haven’t been in the positive numbers since July, and that was only a modest 0.44% gain.

The Eurekahedge European Hedge Fund Index “is on track to post its worst yearly return since the peak of the Eurozone crisis in 2011.”

Brexit and Italy’s Budget Deficit

Specifically, thus far the EEHFI’s 2018 return is -2.94%, a sharp contrast with the 2017 return of +7.15%.

The bad 2018 numbers are not the fault of Brexit alone. Italy’s populist government spent November, insisting on pursuing a free spending budget plan, one that would have trebled the deficits that the previous government had projected, to the alarm of the nations to its north. Italy’s 10-year government bond yield rose to 3.8%, and the Italy-Germany 10 year bond spread reached its highest level since 2013. [In recent days, Rome seems to have backed away from its position on this issue, and it will accept some measure of austerity in order to remain in concord with the rest of the continent.]

Among strategies, the macro funds have been especially hard hit by the news from Britain and from Italy. The Eurekahedge Macro Hedge Fund Index was down 0.56% in November, and the European mandate macro funds lost 2.63%.

A Lot of Red Ink

Divided by region, the performance results and asset flows for November specifically look this way (with some rounding).

Remarkably, all the performance numbers are in the red, and the only regional mandate that escapes red ink in netflows rounds out to 0.0.

Breaking down the YTD numbers by strategy, the best performing funds were distressed debt and relative value, which are in the black by $2.2 and $1.7 billion respectively. The stand-out on the negative side are the CTA/managed futures with red ink of $15.9 billion.

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