Key highlights for June 2019:
Q2 hedge fund letters, conference, scoops etc
- The Eurekahedge Hedge Fund Index was up 1.83% in June, bringing its year-to-date return to 5.84%. Roughly 24.7% of the hedge fund managers comprising the index have recorded double-digit gains over the first half of the year.
- The global hedge fund industry AUM has grown by US$2.0 billion as of June 2019 year-to-date. Preliminary Q2 2019 net outflows figure stood at US$23.8 billion, as investor redemptions continued to slow down. Hedge fund managers recorded US$46.4 billion and US$94.7 billion of net outflows in Q1 2019 and Q4 2018 respectively.
- The Eurekahedge North American Hedge Fund Index was up 7.04% year-to-date, as fund managers focusing on the region benefited from the equity market rally throughout the first half of the year. The S&P 500 gained 17.35% over the first half of 2019, while the tech-heavy NASDAQ Composite was up 20.66% over the same period. North American hedge fund managers have recorded US$49.9 billion of performance growth year-to-date.
- The Eurekahedge Greater China Hedge Fund Index gained 3.98% in June, bringing its year-to-date gain to 9.87%. Investor confidence in the US$28.5 billion mandate had remained robust with US$0.9 billion of net inflows recorded in 2018, in spite of the US$2.3 billion performance decline over the same year.
- The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 2.49% in June, with mixed returns among its underlying regional mandates. The heightened tension between the US and Iran resulted in a sharp increase in oil prices during the month, which acted as a performance contributor for CTA/managed futures hedge funds along with long positions in metals. Preliminary data showed that the strategic mandate saw US$2.3 billion of net inflows in June, the strongest monthly investor allocation since January 2018.
- Hedge fund managers utilising fixed income strategies ended the month of June up 1.12% on the back of strong government and corporate bond markets. Growing expectations over imminent rate cuts from major central banks drove bond yields down over the month. Most notably, the US 10-year bond yield dipped to its lowest level since 2016. On a year-to-date basis, the Eurekahedge Fixed Income Hedge Fund Index has returned 5.09%.
- The Eurekahedge ILS Advisers Index was up 0.09% in June, bringing its year-to-date loss to 1.30%. Despite being a calm period of insurance losses, the first half of 2019 has seen ILS hedge fund managers crippled by loss creep from past events.
- The Eurekahedge Crypto-Currency Hedge Fund Index rallied 18.88% in June, recording its fifth consecutive positive month of the year. Crypto hedge fund managers benefited from the rally in crypto assets which saw Bitcoin breaching the US$12,000 level for the first time since the Q1 2018 crash. The index was up 109.46% over the first half of 2019.
2019 Key Trends in European Hedge Funds
The Eurekahedge Hedge Fund Index was up 1.83% in June recording its strongest first half return of 5.84% since 2009. Hedge fund managers benefited from strong equity market performance on the back of optimism over the progress of US-China trade talks and the growing expectation of a rate cut of the Federal Reserve over the month. The global equity market as represented by MSCI ACWI (Local) gained 5.41% during the month. The expected meeting of the US President Donald Trump and his Chinese counterpart Xi Jinping during their G-20 summit in Osaka renewed investor optimism on the resolution of the trade conflict which has plagued the market since last year. Meanwhile, weak economic data combined with rising concerns of a global economic slowdown prompted the Federal Reserve to reassess their stance. The expectations that the Fed will soon cut rates resulted in declining bond yields throughout the month, with the US 10-year bond yield dipping to its lowest level since November 2016.
Approximately 78.2% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in June, and 24.7% of the fund managers in the database were able to generate double-digit returns over the first half of the year. Returns were positive across regions, with Asia ex-Japan fund managers up 2.04% as investor confidence on the continuation of US-China trade talks acted as tailwind for the region’s equity market. Fund managers focusing on North America also benefited from the equity market rally and gained 1.94%. Both mandates had recorded strong first half performance on the back of robust economic growth and accommodative central bank policies. North American hedge funds have returned 7.04%, ahead of their Asia ex-Japan peers who were up 6.37% over the first six months of 2019.
June 2019 and May 2019 returns across regions
Figure 2 illustrates the year-to-date performance of hedge fund managers across regions. Supported by the strong performance of the global equity and bond markets, all regional mandates were up for the year, with Latin American hedge funds leading the pack with their 8.27% return. On the other end, fund managers focusing on Japan have returned 2.61% year-to-date, trailing behind the other regional mandates.
2019 returns across regions
Mizuho-Eurekahedge Asset Weighted Index
The asset-weighted Mizuho-Eurekahedge Index – USD was up 2.03% in June, after ending 2018 down 4.30%. 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.
All of the Mizuho-Eurekahedge indices posted positive returns in June, with the Mizuho-Eurekahedge Asia Pacific Index gaining 2.64% over the month. In terms of year-to-date return, all of the Mizuho-Eurekahedge Indices were in positive territory, with managers focusing on emerging markets and Asia Pacific generating the strongest returns of 8.20% and 6.13% respectively.
| Mizuho-Eurekahedge Indices
June 2019 returns
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Mizuho-Eurekahedge Indices
2019 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.
Despite the muted market volatility during the month of June, the CBOE Eurekahedge Short Volatility Hedge Fund Index was down 0.34%. In contrast, hedge fund managers utilising tail risk volatility strategies gained 9.37% over the month. On a year-to-date basis, long volatility hedge fund managers were down 7.35%, placing them last among the four volatility strategy categories.
| CBOE Eurekahedge Volatility Indexes
June 2019 returns
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CBOE Eurekahedge Volatility Indexes
2019 year-to-date returns
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Summary monthly asset flow data since January 2013
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.
