Eurekahedge: Hedge Funds Book 7th Straight Gain As AUM Expansion Falters

Oct 12 2016 | 12:39am ET

Hedge funds booked their seventh consecutive month of gains in September although assets under management expanded at the weakest pace since the financial crisis, according to a flash update from Eurekahedge.

The Eurekahedge Hedge Fund Index gained 0.50% in September, outperforming the 0.19% gain booked by the MSCI AC World Index. Close to 63% of underlying constituent funds in the Eurekahedge Hedge Fund Index were in positive territory this month, with majority of them being long/short equity mandated. Japan hedge funds led performance among regional mandates, up 1.35% while distressed debt managers topped the table across strategies, gaining 1.07%.

On a year-to-date basis, the Eurekahedge Hedge Fund Index is up 3.35%, with close to 15% of managers posting double-digit returns. Roughly 38% of managers posting returns in excess of 10% in 2016 year-to-date are long/short equity mandated, while another 19% are CTA/managed futures mandated.

Other key highlights from Eurekahedge’s September 2016 flash report:

  • The $2.26 trillion hedge fund industry has grown by $17.6 billion year-to-date, down from $93.4 billion over the same period in 2015 and the weakest pace since 2009. Fund liquidations outpaced new launches globally, with a total of 548 closures versus 500 launches as of 2016 year-to-date.
  • Event driven hedge funds were up 0.54% during the month, and up 6.81% year-to-date as positions in M&A deals within the F&B, pharmaceuticals and technology sector lead performance. Roughly 18% of actively reporting event-driven hedge funds posted double-digit returns for 2016 YTD.
  • North American hedge fund managers are up 5.40% YTD while their European and Japanese counterparts are in the red, down 0.46% and 2.93%, respectively.
  • The Eurekahedge Distressed Debt Hedge Fund Index posted the best returns among strategic mandates in September and was up 1.07% during the month. Managers also posted impressive year-to-date gains, up 8.66% - the best year-to-date returns for the strategy on record.
  • Latin American long/short equities hedge funds posted the best year-to-date gains, up 20.42% while Japanese long/short equities hedge funds fared the worst, losing 2.98% over the year.
  • Asia ex-Japan hedge fund managers gained 0.53% during the month, with strength being led by underlying Greater China and India mandated hedge funds which were up 0.73% and 1.82% respectively over the same period.
  • Performance was mixed across strategic mandates, with macro mandated hedge funds being the only strategic mandate to post negative returns during the month, down 0.50%.
  • Long/short equities hedge fund managers gained 0.73% in September with underlying equity long bias hedge funds up 0.71%, despite lacklustre performance of global equity markets.
  • Multi-strategy and CTA/managed futures hedge funds were also up in September, gaining 0.47% and 0.33% respectively. The performance of CTA/managed futures managers was led by exposure into long energy, commodities and short GBP/USD positions.
  • On a year-to-date basis, distressed debt hedge funds lead the table, up 8.66% followed by event driven and relative value hedge funds, up 6.81% and 6.21%, respectively. Should the oil recovery remain sustainable towards Q4 2016, distressed debt hedge funds could be on track as the best performing hedge fund strategy this year.

Eurekahedge’s flash data is based on 37.83% of funds that had reported September 2016 returns as at 11 October 2016. The company tracks asset flows, hedge fund performance and regional key trends across the hedge fund universe, tracking more than 130 data points on more than 24,000 alternative funds in its database.

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