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Eurekahedge Hedge Fund Index down 1.73% in February

Wednesday, March 18, 2020
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was down 1.73% in February, outperforming the underlying global equity market as represented by the MSCI ACWI (Local) which lost 7.84% over the month.

Global equities rallied earlier into the month, supported by the improving situation in China over the COVID-19 outbreak and stimulus packages announced by central banks.

The tech-heavy NASDAQ Composite recorded a new all-time high for the week ending February 14, as the encouraging macroeconomic data in the region also contributed to its performance during the period. However, the market risk sentiment quickly shifted towards the end of the month as investors grew concerned over the surging number of newly infected people outside China, particularly in South Korea and Italy, resulting in global equity sell-offs over the final week of the month.

For the week ending February 28, the DJIA and S&P 500 plummeted 12.36% and 11.49% respectively - recording their worst weekly returns since the 2008 global financial crisis. On a similar note, European equities finished the month in negative territory, despite the dovish stance exhibited by the ECB and fiscal stimulus packages announced by the German government.

The FTSE100 and DAX Index were down 9.68% and 8.41% respectively during the month. On the other hand, Asian equities outperformed their global peers as the spread of COVID-19 in Mainland China decelerated. The Shenzhen Composite Index gained 2.56% during the month, and the Hang Seng Index recorded a small loss of 0.69% in February.

Approximately 34.4% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in February, and 41.7% of the fund managers in the database were able to generate positive returns in 2020.

Returns were negative across regions, with Asia ex-Japan fund managers down 0.70% in February, outperforming their regional peers over the month. Fund managers focusing on Europe lost 2.35%, despite the ECB's accommodative stance.

Looking at year-to-date returns, Asia ex-Japan hedge funds lost 0.81%, ahead of their North American peers who were down 2.23%.

Global hedge fund industry AUM increases by $10.3bn in 2019

The global hedge fund industry AUM had increased by US$10.3 billion in 2019. Investor redemptions totalling US$127.5 billion have been recorded throughout the year, a level the industry has not seen after the global financial crisis.

Going into 2020, net investor outflows of US$1.7 billion and a performance-based decline of US$30.4 billion have been recorded as of February 2020 year-to-date.

The Eurekahedge Hedge Fund Index registered its strongest outperformance relative to underlying markets since February 2009, outperforming the MSCI AC World Index by 6.11% in February.

Long volatility and tail risk hedge funds led the performance tables in February and have outshined most other strategies as market volatility level remained elevated during the month.

The Eurekahedge North American Hedge Fund Long Short Equities Hedge Fund Index declined 3.71% in February, weighed by the US equity market sell-offs toward the end of the month. Underlying constituents for the index have outperformed the S&P 500 Index by 4.18% as of February 2020 year-to-date.

The Eurekahedge Greater China Long Short Equities Hedge Fund Index was up 1.70% in February, outperforming the Hang Seng Index by 2.39% and the CSI 300 Index by 3.29%. Optimism over the improving COVID-19 situation in Mainland China and the accommodative policies of the PBOC have provided some support for the region's equity market. On a year-to-date basis, the US$30.3 billion Greater China mandate was up 1.03%.

The Eurekahedge Fixed Income Hedge Fund Index was down 0.77% in February, in spite of the risk-off sentiment in the market, which boosted global government bonds throughout the month. The Fed and the ECB have signalled potential policy supports to counter the economic slowdown caused by the COVID-19 outbreak, resulting in lower bond yields during the month.

Fund managers utilising AI/machine learning strategies lost 0.59% in February, breaking their streak of five consecutive positive months since September last year. On a year-to-date basis, the Eurekahedge AI Hedge Fund Index is still up 0.24%.

The Eurekahedge Crypto-Currency Hedge Fund Index was down 1.31% in February, outperforming Bitcoin which ended the month down 8.03%. Fund managers focusing on crypto-currencies are up 17.82% over the first two months of 2020.

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