Hedge fund managers have their strongest return since 2009: EurekahedgeGuest Post
The December Eurekahedge report has been released
Key highlights for November 2020:
- Hedge fund managers recorded their strongest return since 2009 and were up 4.50% in November, supported by the strong performance of the global equity market as represented by the MSCI ACWI (Local) which generated 11.63% return throughout the month. On a year-to-date basis, global hedge funds were up 8.09%, with more than 40% of its underlying constituents having underperformed the global equity market over the first 11 months of 2020.
- Assets under management for the global hedge funds industry have rebounded increasing by US$128.0 billion over the past eight months since March 2020. This has come from performance-driven gains of US$139.8 billion and net investor outflows of US$11.8 billion. This marks a sharp recovery following a US$264.1 billion asset decline in Q1 2020.
- North American hedge funds were up 6.46% in November, outperforming their Asia ex-Japan and European peers who were up 5.41% and 4.27% during the month respectively. In terms of year-to-date performance, Asia ex-Japan and North American hedge funds generated a double-digit performance of 18.94% and 11.13% respectively, compared to the 1.85% and -2.13% of their European and Japanese counterparts over the first 11 months of the year.
- The Eurekahedge Greater China Hedge Fund Index was up 5.38% in November, supported by the strong performance of the region’s equity market as seen from the 9.27% and 5.64% return of Hang Seng and CSI 300. In terms of year-to-date return, Greater China hedge funds were up 30.69% on track to posting their best annual performance since 2009 with nearly a quarter of their constituents recording a YTD return in excess of 40%.
- The Eurekahedge Long Short Equities Hedge Fund Index was up 6.88% in November, registering their best monthly performance since 2000. The strong rally of the global equity market supported the performance of the fund managers with the DAX and S&P 500 up 15.46% and 10.75% respectively. On a year-to-date basis, long/short equities hedge funds were up 12.47% as of November 2020, bringing their performance since end-March to 27.08% which marks their best 8-month performance since the inception of the index.
- Hedge fund managers utilising relative value strategies were up 5.90% in November, recording their best monthly performance since the inception of the index as reflected in the Eurekahedge Relative Value Hedge Fund Index. On a year-to-date basis, relative value hedge funds have also done well with an 8.69% gain over the first 11 months of the year, compared to 6.17% and 4.51% of macro and multi-strategy hedge funds respectively.
- Hedge funds utilising structured credit strategies were up 2.52% in November, recording their eighth consecutive month of positive return as tracked by the Eurekahedge Structured Credit Hedge Fund Index which rebounded by 20.78% since end-March after a poor performing first quarter. In terms of year-to-date return, structured credit hedge funds were down 5.81% as of November 2020, underperforming their fixed income and distressed debt peers who returned 3.42% and 0.13% respectively.
- Fund managers focusing on cryptocurrencies were up 25.63% in November as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, supported by the robust performance of Bitcoin which was up 33.45% and trading around its 2017 peak. Looking at year-to-date return, cryptocurrency hedge funds are up 128.60%, trailing behind to Bitcoin which returned 149.81% over the first 11 months of 2020.
Key Trends in European Hedge Funds
The Eurekahedge Hedge Fund Index was up 4.50% in November 2020, supported by the strong performance of the global equity market as reflected by the 11.63% return of the MSCI ACWI during the month. Global equities ended the month in strong positive territory due to the relatively smooth conclusion of the US presidential election and the announcement of three vaccines that are effective against COVID-19, eclipsing worries about the near-term economic outlook. Despite the reimposition of restrictive lockdown measures across many European countries to curb the increasing number of new COVID-19 infections, European stock indices rallied strongly as news of the better than expected efficacy of several vaccine candidates led to optimism that the worst of the pandemic could soon be over. The FTSE 100 and DAX Index rebounded strongly in November, gaining 12.35% and 15.46% respectively, outperforming their peers in North America and Asia. Over in the US, the successful election of Joe Biden as the 46th president of the United States drove a risk-on mood in markets as investors looked forward to greater certainty and a more diplomatic and multilateral approach in foreign policy matters. The DJIA gained 11.84% in November, reversing its 2020 return into positive territory, while the tech-heavy NASDAQ was up 11.80% which extends its year-to-date return to 35.96%. Returns were mostly positive across geographic mandates in November. Fund managers focusing in North America were up 6.46%, outperforming their Asia ex Japan and European peers who returned 5.41% and 4.27% respectively. Across strategies, long/short equities, event driven and relative value hedge fund managers were up 6.88%, 6.06% and 5.90% respectively throughout the month.
Roughly 81.8% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in November, and 31.5% of the hedge fund managers in the database were able to maintain double-digit returns over the first 11 months of 2020.
November 2020 and October 2020 returns across regions
Figure 2 illustrates the 2020 performance of hedge fund managers across regions. Despite the sharp sell-off in the first quarter of 2020 which was the worst quarterly performance for global hedge funds since inception due to the spread of COVID-19, most regions have recovered from their deep losses as the global equity market exhibited a strong rebound since the second quarter of the year, supported by the easing economic policies and encouraging progress of vaccine development. Asia ex-Japan hedge funds claimed the top spot by recording 18.94% return, thanks to the strong performance of the Asian equity market particularly in the Chinese region. In the same vein, North American hedge funds followed behind with their 11.13% return, driven by the strong rally of US equities since end-March. On the other end of the spectrum, European and Japanese hedge funds lagged behind the group as they registered 1.85% and -2.13% return as of November 2020 respectively.
2020 returns across regions
The Eurekahedge Asset Weighted Index – USD was up 4.45% in November, reversing its YTD performance into positive territory to 1.84% over the first 11 months of 2020. The strong performance of the equity market and weak US dollar supported the index performance. It should also be noted that the Eurekahedge Asset Weighted 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.
All of the Eurekahedge asset-weighted indices were up in November, with the emerging market and long/short equities asset-weighted indices taking the lead by gaining 7.42% and 7.18% respectively, supported by the double-digit performance of the equity market particularly in Europe and North America. In terms of year-to-date return, Asia Pacific mandates were in the lead, with their 14.39% return compared to the -8.66% return of the emerging market mandate.
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 Volatility Indexes ended the month of November with mixed returns, with relative value volatility hedge funds up 2.25%, while long volatility hedge funds were down 5.75%. The market risk-on sentiment contributed to the positive performance of both relative value and short volatility as seen from the decline of the CBOE Volatility from 38th to 20th level since the start of the month. In terms of year-to-date returns, the CBOE Eurekahedge Tail Risk Volatility Hedge Fund Index topped the chart with its 32.23% return, while the CBOE Eurekahedge Short Volatility Hedge Fund Index was up 2.74%, placing them last among the four volatility strategy categories.
Summary monthly asset flow data since January 2013
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. 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.