Index Flash Update (11 December 2018) – Mixed returns for hedge funds in November as US, Asia recover but European managers sink over Italy and Brexit
Q3 hedge fund letters, conference, scoops etc
The Eurekahedge Hedge Fund Index was down 0.17%1 in November, trailing the global equity market as represented by the MSCI AC World Index (Local) which edged 1.11% higher. 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 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. Despite the robust gains recorded by major equity indices across North America and Asia Pacific, the Eurekahedge Long Short Equities Hedge Fund Index was down 0.49% throughout the month, as fund managers struggled to position themselves to benefit from the equity market reversal over the latter half of the month. On a year-to-date basis, the Eurekahedge Hedge Fund Index was down 2.40% over the first eleven months of 2018, and is on track to post its worst performance since the global financial crisis in 2008.
Roughly 44.8% of the underlying constituents of the Eurekahedge Hedge Fund Index avoided posting losses over the month, and barely 9.2% of the hedge fund managers were able to maintain double-digit year-to-date returns. The asset-weighted Mizuho-Eurekahedge Index (USD) declined 0.73% during the month, in contrast to the 0.17% loss posted by the equal-weighted Eurekahedge Hedge Fund Index, indicating that the losses were heavier among the large-sized hedge fund managers. Indeed, the equal-weighted Eurekahedge Small Hedge Fund Index which comprises fund managers overseeing no more than US$100 million in assets was marginally up by 0.09%, in contrast to the 0.98% losses posted by billion dollar hedge funds over the month.
Below are the key highlights for the month of November 2018:
- Hedge funds were down 0.17% in November, trailing behind the MSCI AC World Index (Local) which gained 1.11% over the month. Roughly 23.2% of the hedge fund managers tracked by Eurekahedge outperformed the market index in November.
- On an asset-weighted basis, hedge funds lost 0.73% in November, bringing their year-to-date losses to 3.79%, as captured by the Mizuho-Eurekahedge Hedge Fund Index (USD).
- North American hedge funds gained 0.89% in November, on the back of the underlying equity market rally in response to Powell’s remark that the Fed rates are ‘just below’ the neutral level.
- Over in Asia, optimism over a slower pace of rate hikes in the US boosted the region’s equity markets and currencies. The Eurekahedge Asia ex Japan Hedge Fund Index was up 1.77%, with a sizeable portion of the gains concentrated among fund managers focusing on India (5.80%) and Greater China (2.67%).
- The Eurekahedge European Hedge Fund Index slumped 1.03% in November, with the underlying long/short equities mandate down 1.46% as the region’s equity markets remained vulnerable to uncertainties surrounding Brexit negotiation and Italy’s debt levels.
- Performance across strategic mandates was a mixed bag in November, with arbitrage hedge funds leading the pack by gaining 4.86% over the month. On the other end of the spectrum, distressed debt hedge funds were down 1.66%, dragged by the weakness in high yield market.
- The Eurekahedge CTA/Managed Futures Hedge Fund Index was down 0.23% during the month as plummeting oil and overall weakness in the energy sector weighed on fund managers’ performance. On a year-to-date basis, the index was down 4.21% and the mandate has suffered US$12.2 billion of performance-based losses and US$18.5 billion of net investor redemptions.
- Fund managers utilising AI/machine learning strategies were up 2.09% 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 4.50%.
- The Eurekahedge ILS Advisers Index was down 4.24% as the catastrophic losses incurred by Hurricane Florence and Hurricane Michael weighed on ILS fund managers’ returns. On a year-to-date basis, ILS fund managers were down 3.55%, firmly placing 2018 as the second worst year for the Eurekahedge ILS Advisers Index right next to 2017.
- The Eurekahedge Crypto-Currency Hedge Fund Index was down 10.88% in November, as Bitcoin price crashed below the US$4,000 level nearing the end of the month. The index has lost 61.47% of its value since the end of 2017.
| Main Indices | Nov 20181 | Last 3 Months | 2018 Returns | 2017 Returns | Annualised Returns | Constituents | Weighting |
| Eurekahedge Hedge Fund Index | -0.17 | -2.69 | -2.40 | 8.51 | 8.33% | 2,637 | Equal |
| Eurekahedge 50 | -0.54 | -2.20 | -0.01 | 6.96 | 5.15% | 50 | Equal |
| Eurekahedge North American Hedge Fund Index | 0.89 | -1.91 | 1.27 | 8.27 | 9.23% | 582 | Equal |
| Eurekahedge Asia ex Japan Hedge Fund Index | 1.77 | -4.70 | -7.80 | 20.78 | 9.70% | 182 | Equal |
| Index of the Month | Nov 20181 | Last 3 Months | 2018 Returns | 2017 Returns | Annualised Returns | Constituents | Weighting |
| Eurekahedge Greater China Hedge Fund Index | 2.67 | -5.88 | -11.61 | 29.97 | 13.60% | 71 | Equal |
Main Indices
| Eurekahedge Main Indices | Nov 20181 | 2018 Returns | 2017 Returns |
| Eurekahedge Hedge Fund Index | -0.17 | -2.40 | 8.51 |
| Eurekahedge Fund of Funds Index | -0.64 | -3.03 | 7.22 |
| Eurekahedge Long-only Absolute Return Fund Index | 1.37 | -7.42 | 20.41 |
| Eurekahedge Islamic Fund Index | -0.17 | -3.13 | 6.76 |
Regional Indices
North American fund managers ended the month up 0.89% supported by the region’s equity market recovery and gains in the US treasuries. The S&P 500 index edged 1.79% higher throughout the month, as the equity markets reacted positively to the Fed chair’s dovish stance. Fund managers focusing on Asia ex-Japan gained 1.77% in November, supported by the positive market sentiment on slower US rate hikes and strengthening emerging Asian currencies against the US dollar. Across the Asia Pacific region, India and Greater China mandates topped the table, with 5.80% and 2.67% gains respectively throughout the month. European fund managers were in the red during the month, with the Eurekahedge European Hedge Fund Index down 1.03%. Major equity indices in the Eurozone slumped throughout the month on the back of political concerns over Italy’s budget dispute and Brexit negotiation uncertainties.
| Eurekahedge Regional Indices | Nov 20181 | 2018 Returns | 2017 Returns |
| Eurekahedge North American Hedge Fund Index | 0.89 | 1.24 | 8.27 |
| Eurekahedge European Hedge Fund Index | -1.03 | -3.15 | 7.11 |
| Eurekahedge Eastern Europe & Russia Hedge Fund Index | 0.62 | -7.35 | 10.78 |
| Eurekahedge Japan Hedge Fund Index | -1.46 | -6.34 | 12.91 |
| Eurekahedge Emerging Markets Hedge Fund Index | 1.62 | -3.92 | 16.98 |
| Eurekahedge Asia ex Japan Hedge Fund Index | 1.77 | -7.80 | 20.78 |
| Eurekahedge Latin American Hedge Fund Index | 1.14 | 7.99 | 13.71 |
Strategy Indices
Returns were mixed across strategic mandates in November, with arbitrage fund managers leading the pack with their 4.86% gains. CTA/managed futures mandate was down 0.23% as plummeting oil prices and overall weakness in the energy sector incurred losses to fund managers. The underlying commodity and FX sub strategies were down 1.57% and 1.01% respectively. Distressed debt fund managers lost 1.66% in November, owing to the weak performance of the high yield sector. Despite the trend reversal in equity markets which pushed major indices above their end of October levels, the Eurekahedge Long Short Equities Hedge Fund Index was down 0.49% for the month as fund managers weren’t well-positioned to benefit from the equity market movement over the latter half of November.
Table 1: Index Flash Strategy Return Map
| Eurekahedge Strategy Indices | Nov 20181 | 2018 Returns | 2017 Returns |
| Eurekahedge Arbitrage Hedge Fund Index | 4.86 | 2.76 | 5.28 |
| Eurekahedge CTA/Managed Futures Hedge Fund Index | -0.23 | -4.21 | 2.27 |
| Eurekahedge Distressed Debt Hedge Fund Index | -1.66 | 4.91 | 6.68 |
| Eurekahedge Event Driven Hedge Fund Index | 1.53 | 1.09 | 10.16 |
| Eurekahedge Fixed Income Hedge Fund Index | -0.56 | 0.37 | 6.57 |
| Eurekahedge Long Short Equities Hedge Fund Index | -0.49 | -3.82 | 12.91 |
| Eurekahedge Macro Hedge Fund Index | -0.82 | -2.55 | 4.20 |
| Eurekahedge Multi-Strategy Hedge Fund Index | -0.27 | -2.05 | 9.18 |
| Eurekahedge Relative Value Hedge Fund Index | 0.63 | 2.48 | 6.86 |
| CBOE Eurekahedge Long Volatility Hedge Fund Index | -0.68 | -4.23 | -10.95 |
| CBOE Eurekahedge Relative Value Volatility Hedge Fund Index | -0.16 | -1.72 | 3.23 |
| CBOE Eurekahedge Short Volatility Hedge Fund Index | 0.95 | -7.48 | 9.06 |
| CBOE Eurekahedge Tail Risk Hedge Fund Index | 0.22 | -5.23 | -14.22 |
| Eurekahedge Equity Long Bias Hedge Fund Index | -0.20 | -4.74 | 17.00 |
| Eurekahedge Equity Market Neutral Hedge Fund Index | -1.64 | -2.00 | 3.85 |
| Eurekahedge Trend Following Index | -0.18 | -8.15 | 0.34 |
| Eurekahedge FX Hedge Fund Index | -1.01 | 0.18 | -0.19 |
| Eurekahedge Commodity Hedge Fund Index | -1.57 | -5.59 | 1.27 |
| Eurekahedge Crypto-Currency Hedge Fund Index | -10.88 | -61.47 | 1708.50 |
| Eurekahedge AI Hedge Fund Index | 2.09 | -4.5 | 9.00 |
| Eurekahedge Global Hedge Fund Indices by Fund Size | Nov 20181 | 2018 Returns | 2017 Returns |
| Eurekahedge Small Hedge Fund Index (< US$100m) | 0.09 | -2.76 | 8.61 |
| Eurekahedge Medium Hedge Fund Index (US$100m – US$500m) | -0.46 | -1.83 | 8.17 |
| Eurekahedge Large Hedge Fund Index (> US$500m) | -0.61 | -1.95 | 6.55 |
| Eurekahedge Billion Dollar Hedge Fund Index | -0.98 | -2.58 | 5.97 |
| Mizuho-Eurekahedge Indices | Nov 20181 | 2018 Returns | 2017 Returns |
| Mizuho-Eurekahedge Index – USD | -0.73 | -3.79 | 8.69 |
| Mizuho-Eurekahedge TOP 100 Index – USD | -0.78 | -2.75 | 6.76 |
| Mizuho-Eurekahedge TOP 300 Index – USD | -0.80 | -3.39 | 7.75 |
| Asia-Eurekahedge Indices | Nov 20181 | 2018 Returns | 2017 Returns |
| Eurekahedge Greater China Hedge Fund Index | 2.67 | -11.61 | 29.97 |
| Eurekahedge India Hedge Fund Index | 5.80 | -7.19 | 27.90 |
1 Based on 36.44% of funds which have reported November 2018 returns as at 11 December 2018
