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Table 2 Performance of geographic mandates Asia


ex-Japan


July 2014 year-to-date returns 2013 returns


Three-year annualized returns Three-year annualized standard deviation Three-year Sharpe Ratio (RFR = 2%) Five-year annualized returns Five-year annualized standard deviation Five-year Sharpe Ratio (RFR = 2%) Maximum drawdown (five years)


3.05% 3.02% 2.00% 7.99% 0.00 4.76% 7.40% 0.37


-11.28%


0.96% 9.69% 5.08% 3.93% 0.78 5.49% 3.72% 0.94


-5.17%


2.14% 3.74% 2.57% 3.64% 0.16 3.82% 3.61% 0.50


-4.96%


-0.95% 17.62% 4.58% 5.76% 0.45 N/A N/A N/A


-11.70%


Source: Eurekahedge Europe Global Japan Latin America


7.13% -8.79% -1.70% 12.87% -0.29 8.06% 13.62% 0.44


-15.94%


North America


-1.00% 16.70% 4.70% 6.47% 0.42 5.77% 6.15% 0.61


-8.51%


aware that this might result in less tolerance for lacklustre performance as investors can quickly withdraw their funds on a whim. In terms of 2013 returns, UCITS fund managers investing with a Japan mandate generated the highest gains – up 17.62%, attributed to short positions on the Japanese yen versus dollar and long positions on the Nikkei. North American and Europe mandates also produced notable gains of 16.70% and 9.69% respectively.


Fig.11 Performance across strategic mandates July 2014 year-to-date returns


-8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12%


2013 returns Three-year annualized returns Source: Eurekahedge


With regard to their risk/reward characteristics, European UCITS funds boast the best three-year Sharpe ratio of 0.78, beating the Eurekahedge European Hedge Fund Index’s 0.34 Sharpe ratio. Latin American funds, despite their strong showing in 2014, pose significant risks to investors with the highest three and five-year annualized standard deviations and maximum drawdown of almost 16%.


leads the table for the three and five-year period due to the multi-year rally in global equity markets, but also possesses the highest annualized standard deviations out of all investment vehicles.


Fig.10 displays the performance of global UCITS funds across the various regional mandates. Latin American UCITS funds posted the strongest July 2014 year-to-date returns, up 7.13% due to a strong showing in Brazilian equities. The Brazil IBOVESPA Index gained 8.39% in the first seven months of


Table 3 Performance across strategic mandates Arbitrage


July 2014 year-to-date returns 2013 returns


Three-year annualized returns Three-year annualized standard deviation Three-year Sharpe Ratio (RFR = 2%) Five-year annualised returns Five-year annualised standard deviation Five-year Sharpe Ratio (RFR = 2%) Maximum drawdown (five years)


1.90% 3.33% 1.42% 2.01% -0.29 1.65% 1.83% -0.19 -4.02%


the year. Globally focused funds, which manage the bulk of UCITS fund assets, returned 2.14% during the same period, though underperforming the Eurekahedge Hedge Fund Index ex UCITS (see Table 1) which was up 3.03%. These phenomena of UCITS hedge funds underperforming their regular hedge fund counterparts are quite a recurrent theme, hinting that investors are willing to trade the additional liquidity afforded by UCITS hedge funds at the cost of a drag on performance. UCITS fund managers have to be


Fig.11 displays global UCITS fund performance in terms of July 2014 year-to-date, 2013, as well as three-year annualized returns, by segregating them into various strategies. As shown, UCITS hedge funds have done pretty well so far this year, with almost all strategic mandates in positive territory. However, funds utilizing relative value strategies, while only a small fraction of UCITS assets, have not fared as well recently, being the only strategy down this year (losing 0.68%) as well as the poorest performing strategy in 2013 (down 5.97%). Long/ short equities managers were the top performers in 2013 with gains of 11.42%, lifted by a round of upward moves in underlying markets explained by strong economic data out of the United States, Japan’s monetary easing policy and a renewed investor confidence.


Among all the strategies, fixed income managers, which happens to be the most popular strategy by AUM, possess the best risk/return profile over the three and five-year time horizons, with a Sharpe ratio of 0.45 and 0.71 respectively. Table 3 also shows that the CTA/managed futures strategies are the most volatile by far over both time periods, with a five-year maximum drawdown of almost 14%. THFJ


Source: Eurekahedge


CTA/managed futures


3.08% -3.73% -2.51% 5.50% -0.82 1.71% 5.95% -0.05


-13.92%


Event driven


3.28% 2.05% 3.49% 3.32% 0.45 4.12% 2.99% 0.71


-4.49%


Fixed income


0.77% 11.42% 4.06% 5.37% 0.38 4.33% 4.90% 0.48


-8.42%


Long/short equities


0.62% 3.31% 0.56% 3.22% -0.45 1.38% 3.08% -0.20 -5.64%


Macro


0.52% 3.15% 1.18% 3.49% -0.23 1.93% 3.66% -0.02 -5.62%


Multi- strategy


5.07% -5.35% 0.36% 3.96% -0.41 2.15% 3.96% 0.04


-7.12%


Relative value


-0.68% -5.97% -3.75% 2.96% -1.95 -2.42% 2.53% -1.75


-12.02%


42


Arbitrage


CTA/managed futures


Event driven


Fixed income


Long/short equities


Macro


Multi-strategy


Relative value


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