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with managers focused on Greater China realising gains of 1.73%, outperforming the CSI 300 Index which declined 1.07% during the month.
On a year-to-date basis, North American and Asia- ex Japan hedge funds lead the table with returns of 2.53% and 2.11% while Japan and Latin America- focused funds are 1.12% and 1.46% respectively. Following the Fed’s second round of QE trimming earlier this year, funds focused on Latin America faced significant headwinds despite which they have managed to outperform the MSCI Latin America Index by more than 6% year-to-date.
Asset-weighted index up in February The asset-weighted Mizuho-Eurekahedge Index was up 2.31% in February as some of the larger index constituents outperformed during the month. It should be noted that the Mizuho-Eurekahedge Index is US dollar-denominated and as such during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies.
The asset-weighted Mizuho-Eurekahedge Long Short Equity Hedge Fund Index posted the largest gains of 3.38%, followed closely by the Mizuho- Eurekahedge Emerging Markets Hedge Fund Index, increasing 2.92% during the month, but still down 0.23% for the year. Emerging markets suffered large losses in January as Fed tapering and currency depreciation prompted capital flight from underlying economies.
Best performance of past 12 months Hedge funds posted their best performance in the last 12 months, up 1.79% with fund managers delivering performance-based gains of $15 billion and recording net asset inflows of $11 billion during the month, bringing the current AUM of the global hedge fund industry to $2.03 trillion – a new record high.
Long/short equity hedge funds recorded their 15th consecutive month of positive net asset flows, with net capital allocations to the strategy for 2014 standing at $19 billion. Trend following strategies posted their ninth consecutive month of net asset outflows in February, and saw redemptions worth $12.7 billion over this period.
Total assets in North American hedge funds reached a new high of $1.36 trillion with assets growing by $11.1 billion in the first two months of the year. Hedge funds investing in Japan recorded their second consecutive month of negative returns, down 1.12% year-to-date. Latin America- focused hedge funds have outperformed the MSCI EM Latin America Index by over 6% on a year-to- date basis.
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Distressed debt hedge funds delivered their eighth consecutive month of positive returns – up 2.25% during the month and 3.37% year-to-date. In 2013, a total of 1,124 new funds were launched while 777 funds reported themselves as liquidated, bringing the current size of the hedge fund industry to 10,757 hedge funds.
Forward redemption indicator up for March The SS&C GlobeOp Forward Redemption Indicator for March 2014 measured 3.81%, up from 3.38% in February. “As we approach the end of the first quarter of 2014, forward redemption requests remain slightly lower than this time last year,” said Bill Stone, chairman and chief executive officer, SS&C Technologies.
Greenwich reports 1.83% February gain Hedge funds ended the month of February up 1.83%, erasing January’s decline. Performance was driven by strong equity markets with the S&P 500 up 4.57% and the MSCI World up 5.21%. Fixed income markets posted small gains of 0.53%, as measured by the Barclays Aggregate Bond Index up 0.53%.
• Long/short equity growth was the best performing strategy group posting a 3.31% return for February. Long/short credit strategies continued their positive performance, returning 1.42% in February.
• Distressed securities strategies had another good month posting a 2.31% return for February. This makes distressed the best performing strategy YTD.
• Developed markets strategies have continued to outperform emerging markets strategies in 2014 with the Greenwich Regional Developed Composite returning 1.66% YTD versus the Greenwich Regional Emerging Composite which is down -1.07% YTD.
Slow take-up of '40 Act funds, finds survey Infovest21’s Eighth Annual Manager Snapshot Survey provides an updated profile of the typical hedge fund manager. The survey finds that commingled vehicles account for about 47% of the product base while customised mandates and retail products account for 37% and 11% respectively. Only 7% of the respondents offer ‘40 Act mutual funds; however, 17% are sub-advisors to a ‘40 Act mutual fund of funds.
Lois Peltz, president of Infovest21 and author of the report, said, “Of those not sub-advising, over 60% do not plan to move in that direction in the next year. However, 27% do plan to move in that direction while another 12% are considering it.“ Of those not offering a ‘40 Act mutual fund, 12% said their strategy is not suitable while 8%
highlighted the cost as the main reason for not taking this approach. Another 8% cited the lack of incentive fee as the primary stumbling block. Other reasons included being too small, generally not liking retail funds, daily liquidity issues or their focus being on commingled products.
The typical hedge fund organisation’s investor base includes 24% high-net-worth/family offices, 12% pension funds, and 11% each to financial institutions, funds of funds and foundations. Looking out a year, managers expect high-net- worth/family offices, pensions and insurance companies’ percentage of the investor mix to remain about the same while funds of funds’ and corporations’ percentages are expected to increase. The percentage for foundations and other financial institutions is expected to fall.
Large managers (those with over $1 billion in assets) had a higher percentage of pensions, endowments and foundations than smaller and medium-sized managers. Medium-sized managers ($500 million to $999.9 million) had a relatively higher percentage of financial institutions while smaller managers (those with assets below $500 million) tend to have a higher percentage of family offices, funds of funds and corporate investors.
The average fee structure is a 1.5% management fee and a 16.6% performance fee. The most- cited challenge for 2014, as cited by 48% of the managers, is growing assets.
Asset flows update Hedge funds posted a strong rebound in February with the Eurekahedge Hedge Fund Index up 1.79% as underlying markets rallied with the MSCI World Index gaining 3.87% during the month.
Final asset flow figures for January revealed that managers incurred performance-based losses of $4.5 billion while recording net asset outflows of $1.7 billion as hedge funds got off to a rough start in 2014. Preliminary data for February shows that managers have posted performance-based gains of $14.8 billion while net asset inflows stand at $11.0 billion, bringing the current assets under management (AUM) of the industry to $2.03 trillion – the highest level on record.
Investor 2014 forecasts positive Commonfund Forum has released its annual survey data showing that institutional investor expectations for 2014 remain positive. Overall, investor expectations for 2014 are reasonably strong with an average forecast for the S&P 500 Index of 6.5% and a median forecast of 7%. This represents a slight decrease from last year’s average forecast of 7.9% and a median forecast of 8.0%.
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