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Hedge funds continued to outperfrom the global equity market under market risk-off environment

Tuesday, November 10, 2020
Opalesque Industry Update - The Eurekahedge Hedge Fund Index was down 0.16% in October 2020, outperforming the global equity market as represented by the MSCI ACWI (Local), which lost 2.29% over the same period. Global equities ended the month in negative territory due to the reimposition of national lockdowns across Europe, uncertainty in the outcome of the US presidential election, and the breakdown in US fiscal stimulus talks.

The acceleration of average daily cases in Europe forced the authorities to reimpose restrictive measures to curb the increasing number of new infections, resulting in the weak performance of the equity market in the region. The DAX underperformed its peers by ending the month of October down 9.44%, while the FTSE100 plunged 4.92%.

Over in the US, uncertainty in the recent presidential election combined with the delay of the new federal coronavirus relief package also dented market risk sentiments in the region. The US equity benchmarks were also down but fared better compared to their European peers.

The S&P500 and tech-heavy NASDAQ retreated 2.77% and 2.29% throughout the month. Returns were negative across geographic mandates in October except for Asia ex-Japan fund managers who were up 1.16%, outperforming their European and North American peers who were down 0.83% and 0.16% respectively.

Across strategies, arbitrage, event driven and fixed income fund managers were up 0.70%, 0.61% and 0.22% respectively throughout the month.

Roughly 46.6% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in October, and 22.6% of the hedge fund managers in the database were able to maintain double-digit returns over the first 10 months of 2020.

Key highlights for the month of October 2020

Hedge fund managers were down 0.16% in October, outperforming the global equity market by 2.10% throughout the month. On a year-to-date basis, global hedge funds were up 3.12%, with around 67.6% of its underlying constituents having outperformed the global equity market over the first 10 months of 2020.

Billion-dollar hedge funds were up 0.06% during the month, outperforming their smaller peers who were down, with small, medium, and large hedge funds losing 0.12%, 0.27% and 0.07% respectively.

On an asset-weighted basis, hedge funds were down 0.39% in October, as captured by the Eurekahedge Asset Weighted Index - USD. The index is currently down 2.40% year-to-date highlighting the struggles for some of the larger asset managers this year.

The Eurekahedge Greater China Hedge Fund Index was up 1.90% in October, outperforming their Asian peers who were up 0.36%. On a year-to-date basis, the Greater China mandates are up 21.91% over the first 10 months of the year, outperforming their global peers by a substantial margin.

Hedge fund managers utilising arbitrage strategies were up 0.70% in October, outperforming their major strategic peers over the month, with macro and long/short equities hedge funds down 0.80% and 0.27% respectively. On a year-to-date basis, arbitrage focused hedge funds also consistently outperformed their peers as they gained 6.75%, compared to 4.42% and 3.71% of long/short equities and macro hedge funds over the first 10 months of 2020.

The Eurekahedge Structured Credit Hedge Fund Index was up 0.88% during the month, extending its seven-month trailing return to 18.28% since end-March. In terms of year-to-date return, structured credit hedge funds were down 7.74% as of October 2020, underperforming their fixed income and distressed debt peers who returned 0.78% and -1.01% respectively.

Fund managers focusing on cryptocurrencies were up 14.57% in October as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, underperforming the performance of Bitcoin which was up 26.10%. Looking at year-to-date return, cryptocurrencies hedge funds are up 88.76%, slightly higher compared to the 87.19% return for Bitcoin over the first 10 months of 2020.

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