Eurekahedge: Hedge Funds Down -0.48% in October, Up 2.85% YTD

Nov 15 2016 | 11:37pm ET

Hedge funds posted their first decline in seven months in October, according to the latest reading of Eurekahedge’s Hedge Fund Index, although managers outperformed underlying markets for the period. 

The Eurekahedge Hedge Fund Index lost 0.48% in October, compared to a loss in the MSCI AC World Index (Local) of 1.38% over the same period. Looking past the volatility of the U.S. presidential election, rate hike action from the Federal Reserve seems quite likely as strong U.S. macro data and a hawkish Fed has set the stage for tapering in December, the company said.

Among regional mandates, Latin American managers led the table, up 4.07% during the month followed by Japan managers who gained 2.28%. Across strategies, distressed debt hedge funds led the table with gains of 1.96% followed by fixed income hedge funds which were up 0.51%. 

On a year-to-date basis, hedge funds are up 2.85%, with roughly 20% of managers posting double-digit returns compared with 15% over the same period last year. 

Preliminary data for October shows that managers have posted performance-based losses of $3.0 billion while recording net outflows of $8.4 billion, bringing total current assets under management of the global hedge fund industry to a total of $2.25 trillion.

Key highlights for October 2016:

  • Hedge funds are on track for a better showing compared to 2015 when the average fund realized modest gains of 1.65% at this point in the year. Asset growth for the industry remains muted in 2016, expanding by $1.7 billion, a sharp detraction from the $102.5 billion growth seen in 2015.
  • While hedge fund capital allocations are in the red for 2016 with outflows of $16.6 billion for the year, investor subscriptions have favored CTA/managed futures, multi-strategy and relative value strategies which have seen inflows of $12.2 billion, $5.4 billion and $4.0 billion respectively.
  • Hedge funds managing in excess of $1 billion have seen their asset base decline by close to 2% over the year, with redemptions of $27.0 billion while performance-based gains stood at $7.3 billion. In contrast, sub-billion dollar funds have fared relatively better with inflows of $10.4 billion and performance-based gains of $11.0 billion. 
  • The $524.5 billion European hedge fund industry has seen its asset base contract by $10.7 billion year-to-date, with managers seeing strong investor redemptions totaling $7.4 billion over the 10 months. The Eurekahedge European Hedge Fund Index lost 0.65% year-to-date.
  • Net flows for Asia ex-Japan mandated hedge funds went in the red for the year following steep redemptions worth $2.1 billion in October – the highest monthly redemption on record since July 2012. Overall asset growth for Asian mandates is in the red for the year following disappointing returns from Japan (down 0.92%) and Greater China (down 2.15%). 
  • Among emerging mandates, Latin American long/short equities hedge funds have posted the lowest volatilities levels over the three and five year period compared to regional peers in India and China.
  • Macro hedge funds have seen the steepest year-to-date redemptions, with outflows totaling $14.7 billion, with the month of October being its sixth consecutive month of investor redemptions. Event driven and fixed income hedge funds have also seen outflows on a year-to-date basis, down $13.2 billion and $11.6 billion respectively.

Eurekahedge’s data was based on 39.14% of funds that posted October 2016 returns as of November 14, 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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