The June 2013 Eurekahedge Report reveals that hedge funds enjoyed their fifth consecutive month of net allocations and seventh consecutive month of positive returns, up 4% year to date and 0.32% over May. Eurekahedge found that total asset flows for 2013 currently stand at $56.9bn and Asia ex-Japan hedge funds outperformed underlying markets for three consecutive months.
Other highlights included the fact that Eurekahedge is currently tracking almost 500 funds that have delivered more than 15% year to date and more than 250 funds that are up more than 20% year to date, while distressed debt funds extended their winning streak to 11 consecutive months, gaining 22.68% since end June 2012. However, CTA/managed futures funds declined 1.81% in May 2013.
Eurekahedge writes: "May started off on a good note with positive economic data from the US, leading to rallies in global equity markets, specifically in North America where market indices reached all-time highs. The US dollar strengthened against most major currencies, going above 100 level against the Japanese yen for the first time since 2009. The positive sentiment turned mid-month amid weak manufacturing numbers from China and uncertainty regarding the withdrawal of the US Federal Reserve's asset purchase program."
The firm found that most major hedge fund investment regions delivered positive returns over May, with Asia ex-Japan hedge funds reporting the strongest returns during the month. "The managers outperformed the market for the third consecutive month gaining 2.04% in May while the MSCI Asia Ex Japan Index was down 4.35% - the largest returns were posted by funds focused on Greater China, up 4% in May. The Eurekahedge Japan Hedge Fund Index was down 0.15% in May, bringing its year-to-date return to 17.68%, and ending the eight-month winning streak of Japan focused hedge funds. The month's return represents an outperformance by the managers as the Nikkei 225 declined 0.62% while the Tokyo Topix was down 2.52% during May. Japanese markets witnessed some volatility during the month as the Nikkei fell 7.3% in a single day, amid concerns about US stimulus, before rallying at the month end after some positive announcements from the Japanese central bank."
The Eurekahedge North American Hedge Fund Index was up 1.06% in May bring it's year to date return to 4.46%. "The S&P 500 was up 2.08% in May but witnessed a mid-month trend reversal, declining to 1630 after reaching an intra-day high of 1687 in the fourth week of May. This trend was also witnessed across European bourses, however most European indices finished the month higher holding on to gains generated after the ECB's rate cut. The Eurekahedge European Hedge Fund Index was up 0.90% during the month."
The asset weighted Mizuho-Eurekahedge Index was down 0.89% in May as some of the largest constituents of the index underperformed. The firm explains: "Since the Mizuho-Eurekahedge Index is US dollar denominated, during months of strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies – hence the negative returns for the index."
Adding to the currency conversion losses were a few large CTA/managed futures and macro investing funds which posted negative returns for the month. The largest returns in May were delivered by funds focused on the mainland China equities. Among the main regional mandates only Asia ex-Japan managers posted flat-to-slightly-positive returns.
Total assets under management in the industry increased by $3.1bn during May, Eurekahedge reports, bringing the size of the industry to $1.88tln. "Impact of performance on total assets was slightly negative in May as managers lost $1.5bn over the course of the month. On the other hand net flows were positive for the fifth month running with $4.6bn in net allocations."
This piece first appeared in Opalesque's Alternative Market Briefing.
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.