Hans Schlaikier, Hedgeweek

Global hedge fund AUM declines by over USD6 billion in August… US dollar rallies in Asia on hedge fund buys…

Global hedge fund AUM declined by more than USD6 billion in August after Hedge funds witnessed slightly negative returns in August amid increased risk aversion in global markets during the month. The Eurekahedge Hedge Fund Index was down 0.32 per cent during the month, outperforming global stock indices as the MSCI World Index declined by 2.26 per cent in August.

Risk aversion returned to global markets in August driven by a host of factors. The increased likelihood of the United States waging another war in the Middle East, weakening economic situation in emerging markets and continued concerns of QE tapering by the US Federal Reserve (Fed) were the main drivers of the negative market sentiment during the month. Some of the negativity was offset by improving global economic data as the Eurozone emerged from recession and China PMI numbers also displaying positive trends.


Asian hedge funds outperformed the underlying markets once again, delivering healthy returns amid broadly negative trends in underlying market indices. Managers investing in Asia ex-Japan were up 0.13 per cent while the MSCI Asia ex-Japan index declined 1.22 per cent in August. Japan-focused hedge funds outperformed the underlying markets for the fourth consecutive month, gaining 0.11 per cent while the Nikkei 225 was down 2.04 per cent and the Tokyo Topix declined by 2.27 per cent during the month.
 
The various strategic indices saw mixed returns with event driven hedge funds posting the strongest gains of 0.95 per cent as managers found various opportunities in a month where markets were driven by news flow. The Eurekahedge Event Driven Hedge Fund Index is up 5.70 per cent August 2013 year-to-date. Distressed debt hedge funds were up 0.35 per cent in the month, outperforming the high-yield sector in August. The BofA Merrill Lynch High Yield Index lost 0.62 per cent in August. Macro investing funds and CTA/managed futures funds delivered the largest losses during the month of 0.85 per cent and 0.79 per cent respectively.
 
The dollar staged an afternoon rally in Asian trading early this week as hedge fund purchases helped push up the currency.
 
The dollar fetched 99.96 yen from 99.69 yen in New York on Monday, while the euro was at USD1.3251 from USD1.3254. The European single currency strengthened to 132.48 yen from 132.10 yen in U.S. trading.
 
“There have been large buying orders of the euro/yen pair by hedge funds,” said a senior dealer at a major bank in Japan. “That's helping push up the dollar/yen” rate.
The dealer added that the dollar-yen rate could push higher as risk appetite grows after Tokyo's successful bid to host the 2020 Olympics as well as Moscow's proposal on Syria raising the possibility of a US military strike being delayed or shelved.
 
Earlier in the session, the dollar faced selling pressure partly driven by weak US jobs data. All eyes are on the central bank's policy meeting next week for signs of a draw down on the scheme. A pull back would likely push the dollar's value higher.
 
Yen trading has been dominated by data on Monday showing Japan's economy grew more than expected in April-June.
 
China also reported upbeat economic figures at the weekend with a better-than-expected trade performance in August, as stronger exports to recovering overseas markets caused the trade surplus to widen to USD28.5 billion.
 
As reported by the South China Morning Post Greg Donohugh joined credit fund manager Double Haven Capital (Hong Kong) as chief executive after leaving his position as managing director of Asia securities at Wells Fargo.
 
Donohugh started earlier this month at the Hong Kong company that was spun out of Japanese asset manager Sparx Group, according to a statement from Double Haven.
He would lead efforts to formulate the company's strategic direction and raise capital, it said.
Double Haven hired Donohugh after assets almost tripled to more than USD635 million since the team left Sparx in October 2011, according to the statement.
 
"Double Haven, now with USD600 million of assets under management, is very much poised for growth," Donohugh said.
 
Donohugh founded in 2004 what evolved into Wells Fargo's regional securities business. As a Hong Kong-based managing director in charge of the division, his responsibilities included fixed-income, some corporate finance activities, derivatives and structured notes, he said.
 
"You see the Asian debt markets in the last three or four years growing dramatically," he said, explaining his decision to join Double Haven. "Added together, they're starting to come close to exceeding that of the US."
 
Asia-Pacific issuers have sold USD1.9 trillion of bonds since the start of 2012, with last year's USD1.2 trillion setting a record on low interest rates and narrow credit spreads. Asia's share of emerging markets fixed-income rose to 58 per cent last year, a 16 percentage point increase over 2000, according to a research report from Ashmore Investment Management in London.

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