Hedge fund managers were down 4.40 per cent in March, outperforming the MSCI AC World Index IMI (Local) by 9.59 per cent during the month – a level of outperformance unseen since October 2008. Long volatility-focused strategies, CTA/managed futures and AI hedge funds top the Q1 2020 league table, while equity long-biased hedge funds nurse losses of close to 20 per cent.
On an asset-weighted basis, hedge funds were down 6.49 per cent in March, as captured by the Mizuho Eurekahedge Hedge Fund Index (USD). The index is currently down 8.95 per cent year-to-date.
As of Q1 2020, the global hedge fund industry AUM has declined by almost USD110 billion based on preliminary estimates for March data. Performance-driven losses so far for the year stand at roughly USD70 billion while investors have redeemed USD40 billion from underlying managers so far. We expect the performance-driven decline for Q1 2020 to exceed the USD130 billion mark once full March numbers have rolled in. For more details on the ‘5 Worst Quarters for the Hedge Funds Industry’ see Figure 1.
The Eurekahedge North American Long Short Equities Hedge Fund Index slid 6.65 per cent lower in March, attributed to the massive sell-offs in the US equity markets throughout the month, driven by the worsening COVID-19 outbreak situation in the country. Underlying constituents for the index have outperformed the S&P 500 Index by 9.24 per cent as of March 2020 year-to-date.
The Eurekahedge Greater China Hedge Fund Index was down 4.92 per cent in March, outperforming the Hang Seng Index by 4.75 per cent and the Shenzhen Composite Index by 2.62 per cent. Optimism over the improving COVID-19 situation in Mainland China and the accommodative policies of the PBOC have provided some support for the region’s equity market. On a year-to-date basis, the USD30.7 billion mandate was down 4.64 per cent.
The Eurekahedge Fixed Income Hedge Fund Index was down 8.58 per cent in March, recording its worst monthly performance since the index’s inception. Exposure to high yield corporate bonds acted as the primary performance detractor for fixed income hedge fund managers during the month, as the COVID-19 outbreak resulted in higher default rates and lower credit ratings.
The Eurekahedge CTA/Managed Futures Hedge Fund Index was up 2.25 per cent in March, despite the sharp decline of energy prices, which fell to their lowest level since 2002 during the month as fund managers adjusted their exposure to the sector. Long exposure to equities was a common performance detractor for CTA/managed futures funds during the month.
Fund managers utilising AI/machine learning strategies gained 3.45 per cent in March, registering their third consecutive month of outperformance against the wider hedge fund industry. On a year-to-date basis, the Eurekahedge AI Hedge Fund Index is up 3.19 per cent.
The CBOE Eurekahedge Long Volatility Hedge Fund Index was up 23.13 per cent in March – recording its strongest monthly return since inception. The CBOE VIX spiked past 80, a level it has not seen since October 2008, reflecting the elevated level of market volatility during the month. Fund managers comprising the index recorded their best quarterly performance since 2005, as they returned 34.79 per cent over the first quarter of 2020.
The Eurekahedge Crypto-Currency Hedge Fund Index was down 20.21 per cent in March, outperforming Bitcoin which ended the month down 26.14 per cent. Fund managers focusing on crypto-currencies are down 4.79 per cent over the first three months of 2020.