Hedge funds up 8.58% in 2019, recording their strongest year since 2013Guest Post
The Eurekahedge Hedge Fund Index gained 1.52% in December, supported by the underlying equity market performance which pushed the MSCI ACWI (Local) 2.57% higher over the same period. The markets reacted positively to the encouraging geopolitical development surrounding the US-China trade talks. The two economic powerhouses officially reached an agreement which avoided the additional tariffs on Chinese imported goods originally slated for December 15. In return, China agreed to purchase more US agricultural products, tighten intellectual property protection, and end practices of forced technology transfer from US companies. The resulting risk-on sentiment boosted major US equity benchmarks to new all-time highs during the month. Over in Europe, UK equities outperformed their European peers, supported by the passage of the Brexit Withdrawal Agreement. The FTSE 100 edged 2.67% higher during the month. On the other hand, positive trade developments, monetary stimulus and strong macroeconomic data pushed Asian equity markets higher, with the Hang Seng Index and the Shanghai Composite Index up 7.00% and 6.20% respectively. Returns were positive across geographic mandates in December, with fund managers focusing on Asia ex-Japan up 2.36%, outperforming their North American and European peers who were up 1.74% and 1.65% respectively. Japanese hedge funds returned 1.25% over the month of December, underperforming their regional peers. Across strategies, event driven, long/short equities and multi-strategy fund managers were up 2.39%, 2.17% and 1.83% respectively throughout the month.
Roughly 74.7% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in December, and 38.0% of the hedge fund managers in the database were able to maintain double-digit returns in 2019.
Below are the key highlights for the month of December 2019:
- Hedge fund managers were up 1.52% in December, pushing their year-to-date return to 8.58%. The official announcement of the completion of the US-China phase-one deal provided support to risk assets, pushing the global equity market higher during the month. The MSCI ACWI (Local) was up 23.44% in 2019.
- On an asset-weighted basis, hedge funds were up 1.53% in December, as captured by the Mizuho Eurekahedge Hedge Fund Index (USD). The index was up 6.90% throughout the year.
- The Eurekahedge North American Hedge Fund Index edged 1.65% higher during the month, as the positive risk sentiment among investors driven by improving geopolitical situations boosted US equity markets.
- The Eurekahedge Greater China Hedge Fund Index was up 5.40% in December, and 17.57% year-to-date. Positive trade developments, combined with strong macroeconomic data acted as tailwinds for the equity market in the region.
- Hedge fund managers utilising fixed income strategies were up 1.02% in December despite weakness in the global government bond market throughout the month. The improved risk sentiment combined with the wait-and-see stance of the ECB and the Fed resulted in higher yields over the year. The Eurekahedge Fixed Income Index ended 2019 up 7.75%.
- Fund managers utilising AI/machine learning strategies returned 0.55% in December. On a year-to-date basis, the Eurekahedge AI Hedge Fund Index was up 5.63%.
- The Eurekahedge Crypto-Currency Hedge Fund Index was down 6.07% in December, outperforming Bitcoin which ended the month down 6.18%. Fund managers focusing on crypto-currencies returned 16.33% in 2019.
|Main Indices||Dec 20191||Last 3 Months||2019 Returns||2018 Returns||Annualised Returns||Constituents||Weighting|
|Eurekahedge Hedge Fund Index||1.52||2.64||8.58||-3.89||8.23%||2,278||Equal|
|Eurekahedge North American Hedge Fund Index||1.65||3.28||9.36||-3.04||8.95%||482||Equal|
|Eurekahedge Asia ex Japan Hedge Fund Index||2.36||4.13||11.81||-9.33||9.74%||163||Equal|
|Index of the Month||Dec 20191||Last 3 Months||2019 Returns||2018 Returns||Annualised Returns||Constituents||Weighting|
|Eurekahedge Long Short Equities Hedge Fund Index||2.17||4.49||10.99||-6.25||8.22%||871||Equal|
|Eurekahedge Main Indices||Dec 20191||2019 Returns||2018 Returns|
|Eurekahedge Hedge Fund Index||1.52||8.58||-3.89|
|Eurekahedge Fund of Funds Index||1.37||8.78||-4.36|
|Eurekahedge Long-only Absolute Return Fund Index||2.47||15.62||-10.80|
|Eurekahedge Islamic Fund Index||2.04||9.77||-4.66|
North American fund managers were up 1.65% in December, bringing their year-to-date return to 9.36%. The robust performance of the equity markets in the region were driven by market optimism towards the development of the US-China trade talks. The S&P 500 was up 2.86%, reaching a new all-time high during the month. Over in Asia, fund managers with Asia ex-Japan investment mandate ended the month up 2.36%, bringing their year-to-date gain to 11.81%. Japan-focused hedge funds ended the month up 1.25%.
|Eurekahedge Regional Indices||Dec 20191||2019 Returns||2018 Returns|
|Eurekahedge North American Hedge Fund Index||1.65||9.36||-3.04|
|Eurekahedge European Hedge Fund Index||1.74||8.06||-4.66|
|Eurekahedge Eastern Europe & Russia Hedge Fund Index||5.93||22.49||-12.86|
|Eurekahedge Japan Hedge Fund Index||1.25||5.87||-9.32|
|Eurekahedge Emerging Markets Hedge Fund Index||3.80||12.46||-5.45|
|Eurekahedge Asia ex Japan Hedge Fund Index||2.36||11.81||-9.33|
|Eurekahedge Latin American Hedge Fund Index||5.04||16.30||6.68|
Returns were mostly positive across strategic mandates in December with commodity and equity long bias mandates up 4.16% and 2.81% respectively on the back of strong equity and commodity markets throughout the month. Long volatility and tail risk fund managers were down 0.86% and 0.26% in December respectively, ending the year 2019 with double-digit losses. On a year-to-date basis, equity long bias fund managers topped the table as seen in the strategy return map below. The mandate has returned 16.97% in 2019, supported by the equity market rallies around the globe.
Table 1: Index Flash Strategy Return Map
|Eurekahedge Strategy Indices||Dec 20191||2019 Returns||2018 Returns|
|Eurekahedge Arbitrage Hedge Fund Index||0.45||5.47||-0.53|
|Eurekahedge CTA/Managed Futures Hedge Fund Index||1.00||5.53||-3.54|
|Eurekahedge Distressed Debt Hedge Fund Index||0.10||1.10||3.25|
|Eurekahedge Event Driven Hedge Fund Index||2.39||8.14||-2.88|
|Eurekahedge Fixed Income Hedge Fund Index||1.02||7.75||0.04|
|Eurekahedge Long Short Equities Hedge Fund Index||2.17||10.99||-6.25|
|Eurekahedge Macro Hedge Fund Index||0.69||8.06||-2.81|
|Eurekahedge Multi-Strategy Hedge Fund Index||1.83||8.57||-3.94|
|Eurekahedge Relative Value Hedge Fund Index||1.05||5.08||-0.15|
|CBOE Eurekahedge Long Volatility Hedge Fund Index||-0.86||-10.34||0.83|
|CBOE Eurekahedge Relative Value Volatility Hedge Fund Index||0.47||-1.24||-3.91|
|CBOE Eurekahedge Short Volatility Hedge Fund Index||1.65||8.48||-13.03|
|CBOE Eurekahedge Tail Risk Hedge Fund Index||-0.26||-9.60||-5.75|
|Eurekahedge Equity Long Bias Hedge Fund Index||2.81||16.97||-9.37|
|Eurekahedge Equity Market Neutral Hedge Fund Index||0.69||2.14||-1.90|
|Eurekahedge Trend Following Index||-0.03||5.36||-6.72|
|Eurekahedge FX Hedge Fund Index||1.07||2.59||-0.23|
|Eurekahedge Commodity Hedge Fund Index||4.16||8.93||-5.53|
|Eurekahedge Crypto-Currency Hedge Fund Index||-6.07||16.33||-71.81|
|Eurekahedge AI Hedge Fund Index||0.55||5.63||-4.31|
|Eurekahedge ILS Hedge Fund Index||1.22||1.85||-3.92|
|Eurekahedge Global Hedge Fund Indices by Fund Size||Dec 20191||2019 Returns||2018 Returns|
|Eurekahedge Small Hedge Fund Index (< US$100m)||1.61||8.43||-4.57|
|Eurekahedge Medium Hedge Fund Index (US$100m – US$500m)||1.49||8.79||-3.07|
|Eurekahedge Large Hedge Fund Index (> US$500m)||1.09||8.56||-2.30|
|Eurekahedge Billion Dollar Hedge Fund Index||0.84||8.29||-2.52|
|Mizuho-Eurekahedge Indices||Dec 20191||2019 Returns||2018 Returns|
|Mizuho-Eurekahedge Index – USD||1.53||6.90||-4.30|
|Mizuho-Eurekahedge TOP 100 Index – USD||1.05||6.66||-2.71|
|Mizuho-Eurekahedge TOP 300 Index – USD||1.34||6.99||-3.56|
|Asia-Eurekahedge Indices||Dec 20191||2019 Returns||2018 Returns|
|Eurekahedge Greater China Hedge Fund Index||5.40||17.57||-13.03|
|Eurekahedge India Hedge Fund Index||0.76||1.59||-8.06|
1Based on 37.93% of funds which have reported December 2019 returns as at 13 January 2020
Article by Eurekahedge