• Assets under management declined by US$21 billion in June and currently stand at US$1.89 trillion
• Launch activity picks up with more than 300 funds launched so far in the year
• Eurekahedge is currently tracking more than 500 funds that have delivered over 15% year-to-date and 250 funds that are up by over 20% year-to-date
• Distressed debt funds end 11-month winning run after gaining 21% from June 2012 to May 2013
• CTA/ managed futures funds in negative territory for the year, down 1.35% year-to-date
• Updated figures for May show that the industry grew by US$28 billion during the month
• AUM of North American hedge funds currently at US$1.29 trillion, expected to cross historical high of US$1.3 trillion by end June
• North American and fixed income hedge funds witness largest performance-based declines in almost 2 years
• Hedge funds post largest monthly loss in one year; long/short equity funds end twelve month winning streak
Performance update
Hedge funds recorded negative returns in June ending their seven month winning run, as global markets witnessed broad based declines during the month. The Eurekahedge Hedge Fund Index was down 1.45% in June, outperforming most major underlying markets as the MSCI AC World Index declined 3.10%.
June witnessed some heightened risk aversion in global markets amid slowing economic growth in China and the US Federal Reserve’s indications that it might scale back its bond buying program. Most major equity markets ended the month in negative territory although market fears regarding a disruption to global economic recovery were somewhat allayed near the month-end as the Fed clarified that any tightening of the monetary policy would be hinged upon solid job creation in the US labour market.
June 2013 and May 2013 returns across regions
The S&P 500 index was down 1.50% in June while the FTSE100 and Hang Seng index were down 5.58% and 7.10% respectively. Asia ex-Japan markets were the worst hit as lacklustre manufacturing data from China continued the flow of dreary macroeconomic numbers from China. Japanese stocks proved to be more resilient compared to their counterparts - with the Nikkei 225 and Tokyo Topix down 0.71% and 0.17% respectively. Towards the end of the month, market reaction to the US Federal Reserve’s indicated framework was downplayed with some positive announcements while strong US macroeconomic data and the ECB’s reiteration of its commitment to a loose monetary policy regime added a further confidence to the markets.
With the exception of Japan, all regional mandates ended the month in negative territory with Asia ex Japan focused hedge funds seeing the largest decline. The Eurekahedge Asia ex Japan Hedge Fund Index was down 4.59% as lacklustre economic indicators from China continued to flow in while the mid-month credit crunch, which saw the SHIBOR (Shanghai Interbank Offered Rate) shoot up to 12% further drained market sentiment. The Shanghai A Share index was down 13.9% for the month with a similar picture emerging in the rest of the region as both the Hang Seng and the Kospi index were down 7.1% and 6.9% respectively. The MSCI Asia ex Japan Index was down by 6.75% for the month.
The seven month winning streak of North American hedge funds also came to an end as the Eurekahedge North American Hedge Fund Index was down 0.21% (up 3.95% YTD) – a significant outperformance to the S&P 500 which declined 1.50%. The Eurekahedge European Hedge Fund Index declined 1.13% during the month, making it the third month of negative returns this year for the regional managers. The Eurekahedge Japan Hedge Fund Index was up 0.03% for the month, bringing its year-to-date returns at an enviable 17.25%. While Prime Minister Abe outlined the ‘3rd arrow’ of his economic policy, it did not do much to boost the market and funds with low long exposures were the ones that performed well during the month while some managers with exposure to transport and industrials also reported gains.
Mizuho-Eurekahedge Asset Weighted Index
The asset weighted Mizuho-Eurekahedge Index was down 2.13% in June as the largest constituents of the index underperformed. The top 15 constituents of the index, which include some of the largest hedge funds in the world, were all in negative territory for the month regardless of strategy and assets traded. Even though some of the large funds are focused on volatility trading, which was up during the month, the negative performance of these funds indicates a disconnect between fundamentals and market performance, which was highlighted in June by the decline in US equity markets following positive macroeconomic numbers.
Index constituents focused on Asia Pacific also witnessed strong declines as the Mizuho-Eurekahedge Asia Pacific Index fell 3.69% in June. Meanwhile emerging markets focused funds also continued their dismal performance and the Mizuho-Eurekahedge Emerging Market index declined 3.98% in June bringing its year-to-date return to -2.48%. It is pertinent to note here that the Brazilian real has plummeted 7.33% against the US dollar year-to-date as the world’s sixth largest economy slows down on the back of falling commodity prices.
Asset flows update
Hedge funds witnessed negative returns in June, bringing an end to their seven month winning streak since November 2012. The Eurekahedge Hedge Fund Index was down 0.69% during the month as global markets reverted to ‘risk-off’ mode amid speculation that the US Federal Reserve will slow down its asset purchase program. The MSCI World Index was down by 3.10 % during the month.
Total assets under management (AUM) declined by US$21 billion during the month, bringing the size of the industry to US$1.89 trillion. Most of the negative impact on total assets came from negative performance in June as managers lost US$18.84 billion over the course of the month. The industry also witnessed net negative asset flows of US$2.12 billion during the month.
