Hedge funds start H2 2018 on a positive note despite struggle for Asian mandates
The Eurekahedge Hedge Fund Index gained 0.41 per cent during the month of July, kicking off the second half of the year on a positive note, despite trailing behind the MSCI AC World Index (Local) which rallied 2.59 per cent over the same month.
Despite the trade friction between the US and China showing no signs of slowing down, North American equity markets posted notable performance on the back of the second quarter earnings season which saw strong earnings from major corporates. The Eurekahedge North American Hedge Fund Index gained 1.17 per cent in July.
European fund managers were also in positive territory, gaining 0.42 per cent over the month, supported by export-sector related equities following the meeting between the US president and the European Commission president which resulted in an agreement to lower tariffs for non-automotive industrial goods.
On the other hand, emerging markets were a mixed bag with gains among Indian and Latin American fund managers, and losses among their peers focusing on Greater China and broad Asia ex-Japan mandates. Across primary investing strategies, most of the Eurekahedge strategy indices edged higher, with the exception of macro, event driven, and CTA/managed futures indices which posted minor losses of 0.17 per cent, 0.10 per cent, and 0.09 per cent during the month.
Roughly 60.6 per cent of the underlying constituents in the Eurekahedge Hedge Fund Index were in positive territory by end-July, with fixed income fund managers leading the pack, gaining 0.81 per cent on average. Among regional mandates, managers with exposure towards Greater China lost 2.39 per cent over the month owing to the poor performance of Chinese equity markets under pressure from the ongoing US-China trade friction. On the other end of the spectrum, Latin American fund managers gained 3.02 per cent in July, bringing their year-to-date gains to 3.85 per cent.
Across strategic mandates, fixed income funds topped the table with their 0.81 per cent return over the month, bringing their year-to-date return to 1.18 per cent. On the other hand, CTA/managed futures hedge funds lost 0.09 per cent in July, marking their third consecutive month of losses.
The Eurekahedge Relative Value Hedge Fund Index edged 0.50 per cent higher in July, with the underlying volatility sub-strategies posting mixed returns. Short volatility fund managers gained 3.58 per cent over the month while long volatility was the only member of the CBOE Eurekahedge Volatility Indexes to post losses during the month, slipping 1.53 per cent.
As opposed to the trend over the preceding month, small hedge fund managers outperformed their larger peers managing in excess of USD100 million in AUM. The Eurekahedge Small Hedge Fund Index gained 0.56 per cent throughout the month, while medium and large fund managers posted gains of 0.28 per cent and 0.12 per cent respectively.
Preliminary numbers show that AI hedge funds are on track to post a fourth consecutive month of losses, with the Eurekahedge AI Hedge Fund Index down 0.09 per cent in July. This loss brought their year-to-date return down to -2.64 per cent, placing them behind all of the primary strategic mandates.
The Eurekahedge Crypto-Currency Hedge Fund Index which tracks 14 hedge funds investing in crypto assets was up 1.65 per cent in July, supported by the recovery of some major crypto-currencies such as Bitcoin and Ethereum. On a year-to-date basis, crypto-currency hedge fund managers were still down 40.44 per cent, narrowly outperforming the Bitcoin price index which declined 44.25 per cent over the same period.