The August 2013 Eurekahedge Report's highlights included:
In terms of performance, the report found that global markets bounced back from a retreat in June amid positive announcements by central banks. The Eurekahedge Hedge Fund Index was up 1.02% during the month and the MSCI World Index was up by 4.83% in July.
July witnessed rallies in global markets which overcame the speculation about the slowdown in the US Federal Reserve's bond-buying program. Although Japanese equities finished lower for the third consecutive month, positive indications on accommodative monetary policy from the US as well as the European Central Bank were supportive for most global indices. Healthy Q2 corporate earnings from the US also helped to drive the upward momentum during the month.
All major hedge fund investment regions, witnessed positive returns during the month. The Eurekahedge Asia ex Japan Hedge Fund Index saw the strongest gains amongst all regional mandates - up 1.93%, outperforming the MSCI Asia ex-Japan Index which was up 1.84% in July. North American hedge funds posted gains of 1.44% during the month as the S&P500 surged 4.95% in July on the back of upbeat corporate earnings, Fed announcements as well as positive macroeconomic data.
European hedge funds also posted healthy returns in July, gaining 1.34%. Trends in the regional markets were similar to those in America with European bourses taking cue from central bank announcements. The DAX was up 3.98% in July while the CAC and the FTSE 100 gained 6.79% and 6.53% respectively.
Japanese hedge funds outperformed the underlying markets for the third consecutive month, gaining 0.93% despite declines in the Tokyo Topix (down 0.19%) and the Nikkei 225 (down 0.07%). Japanese equities were pushed into negative territory in July as the yen appreciated against both the dollar and the euro while corporate earnings were also disappointing. Japan focused managers have outperformed their counterparts in other regions in 2013, the Eurekahedge Japan Hedge Fund Index is up 18.43% July year-to-date.
The asset weighted Mizuho-Eurekahedge Index was up 1.18% in July as the largest constituents of the index, which are some of the largest hedge funds in the world, posted strong performance during the month on the back of short volatility positions. The best performance in July was delivered by a globally investing special situations fund while the worst performance was posted by a fund focused on negative fat tail events.
Index constituents investing globally posted the strongest returns during the month while Asian and emerging markets mandated funds underperformed the main index. Overall, equity focused funds were the best performers in July, in the environment of strongly rallying markets, and remain ahead in the year-to-date measure. The Mizuho-Eurekahedge Long Short Equities Index is up 4.9% July year-do-date.
Total assets under management (AUM) in hedge funds increased by $15.1bn during the month, bringing the size of the industry to $1.89tln. Most of the increase in total assets came from positive performance in July as managers gained $10.1bn over the course of the month. The industry also witnessed net positive asset flows of $5.0bn.
(This piece first appeared in Opalesque on 20th August)
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.