Eurekahedge Hedge Fund Index

Hedge Fund Down 2.4% As Of November 2018 YTD As Volatility Bites

Key highlights for November 2018:

Q3 hedge fund letters, conference, scoops etc

  • The Eurekahedge Hedge Fund Index declined 2.36% as of November 2018 year-to-date, in contrast to the 8.45% gain made in 2017, which turned out to be the best year for hedge funds and equity markets since 2013.
  • The first quarter of 2018 saw the return of market volatility, which pushed nearly every major strategic mandate down into the red in February. CTA/managed futures hedge funds suffered the heftiest losses, with the Eurekahedge CTA/Managed Futures Hedge Fund Index down 4.12% in February alone. The mandate saw performance-based losses totalling US$22.6 billion during the month.
  • Long/short equities mandate bore the brunt of the equity market selloff in October, with the Eurekahedge Long Short Equities Hedge Fund Index ending the month down 3.63%, dragging its year-to-date return into the red for the first time in 2018. Roughly 80% of the funds constituting the mandate posted losses during the month, resulting in performance-based losses of US$29.1 billion which was the steepest decline since 2008 global financial crisis, as well as investor redemptions totalling US$13.2 billion at the same time.
  • European hedge fund managers have been struggling under the uncertainties surrounding Brexit negotiations and Italy’s budget concerns throughout most of 2018. The Eurekahedge European Hedge Fund Index spent eight out of the first 11 months of 2018 in the red, and is on track to post its worst yearly return since the peak of the Eurozone crisis in 2011.
  • Hedge fund managers focusing on Asia Pacific have been suffering from the US-China tariff spat and the Fed’s rate hikes, which sent Asian equity markets and currencies plummeting. Greater China and India mandates, the two best performers in 2017, ended up at the bottom of the table this year as they posted losses of 11.47% and 6.83% respectively.
  • Fund managers utilising AI/machine learning strategies were up 1.25% in November, ending their streak of losses which placed them on track to record their worst year since the inception of the Eurekahedge AI Hedge Fund Index. On a year-to-date basis, the index is still down 5.27%.
  • The Eurekahedge ILS Advisers Index declined 2.84% throughout the month of November, dragging its year-to-date loss to 2.13%. As the catastrophic losses incurred by Hurricane Florence and Hurricane Michael came to light, ILS funds with exposure towards the region were adversely affected.

2018 Overview: Key Trends in European Hedge Funds

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The Eurekahedge Hedge Fund Index ended the month of November down 0.14%, dragging its year-to-date decline to 2.36%. Hedge fund managers struggled to position themselves to capture the upward movement in the equity markets as they recovered from the slump in October. Throughout the month, only 24.3% of the hedge fund managers tracked by the Eurekahedge Hedge Fund Index were able to outperform the global equity market, as represented by the MSCI AC World Index (Local) which gained 1.11% in November. Dovish stance from the US Federal Reserve and anticipation over the G20 meeting in Buenos Aires helped the North American and Asian equity markets recover from the severe losses they suffered last month. On the other hand, uncertainties continued to loom over the European economies as Brexit negotiation remained inconclusive, and Italy’s budget plan raised concerns over the country’s debt levels. In terms of year-to-date performance, preliminary numbers revealed that roughly 9.5% of the hedge fund managers tracked by Eurekahedge were able to maintain double-digit returns throughout the first eleven months of 2018.

North American hedge fund managers ended the month up 0.48%, recovering a small portion of the losses they suffered in October, during which the Eurekahedge North American Hedge Fund Index recorded its worst performance (-2.76%) since the global financial crisis. The S&P 500 index gained 1.79% in November as the region’s equity markets began to recover. The Eurekahedge Asia ex Japan Hedge Fund Index ended their losing streak and climbed 1.81% in November, as market sentiment improved on the back of expectations that the Fed would increase rates in a more gradual pace.

November 2018 and October 2018 returns across regions

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On a year-to-date basis, North American fund managers were up 0.87%, as the losses they posted in October wiped out a significant portion of the gains made in the preceding months. Latin American fund managers were up 7.82% year-to-date, owing to the underlying equity market performance which benefited from improving economic outlook and dwindling political concerns. Meanwhile, Asia ex-Japan fund managers continued to lag behind their peers focusing on other regions despite the gains they made in November, with the Eurekahedge Asia ex Japan Hedge Fund Index still down 7.73% year-to-date, following multiple months of losses over the better part of the year.

2018 year-to-date returns across regions

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Mizuho-Eurekahedge Asset Weighted Index

The asset-weighted Mizuho-Eurekahedge Index – USD ended November down 0.71%, bringing their 2018 year-to-date return to -3.76%. It should also be noted that the Mizuho-Eurekahedge Index is US dollar denominated, and during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies.

Majority of the indices in the suite of Mizuho-Eurekahedge Indices were down during the month, with only the Mizuho-Eurekahedge Asia Pacific Index gaining 0.88% over the month, supported by the rebound in the region’s equity markets as risk outlook in the regions improved and currencies strengthened against the US dollar. On a year-to-date basis, all of the Mizuho-Eurekahedge Indices remained in the red, with Asia Pacific and long short equities fund managers posting the sharpest declines as they ended the first eleven months of 2018 down 6.24% and 5.49% respectively.

Mizuho-Eurekahedge Indices November 2018 returns

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Mizuho-Eurekahedge Indices 2018 year-to-date returns

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CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprise 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 strategies. 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.

The CBOE Eurekahedge Long Volatility Hedge Fund Index ended the month down 0.83% as the market volatility subsided amidst equity market recovery. The CBOE VIX index ended the month 14.88% lower than its end of October level. In the same vein, fund managers utilising short volatility strategies ended the month up 0.30%. On a year-to-date basis, all of the volatility strategies remained in the red, with short volatility fund managers posting the steepest losses of 8.08%. The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index posted the smallest loss of 1.36% as of November 2018 year-to-date.

CBOE Eurekahedge Volatility Indexes October 2018 returns

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CBOE Eurekahedge Volatility Indexes 2018 year-to-date returns

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Summary monthly asset flow data since January 2013

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Article by Eurekahedge

Launched in 2001, Eurekahedge has a proven track record spanning over 16 years as the world’s largest independent data provider and alternative research firm specialising in global hedge fund databases and research. Headquartered in Singapore with offices in New York and Philippines, the global expertise of our research team constantly adapts to industry changes and needs, allowing Eurekahedge to develop and offer a wide array of products and services coveted by institutional investors, family offices, accredited investors, qualified purchasers, financial institutions and media sources. In addition to market-leading hedge fund databases, Eurekahedge’s other business functions include hedge fund research publications, due diligence services, investor services, analytical platforms and risk management tools.

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