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Hedge fund managers post gains of 11.68% in 2020

Thursday, January 21, 2021
Opalesque Industry Update - Hedge fund managers were up 3.30% in December and returned 11.68% in 2020 - recording their best annual performance in over a decade, said Eurekahedge in its January 2021.

In comparison, the underlying global equity market as represented by the MSCI ACWI gained 12.32% in 2020, despite its 21.44% decline in the first quarter. Around 34.6% of the constituents of global hedge funds have outperformed the global equity market throughout the year and 18.0% of them delivered an annual return in excess of 20%.

Billion dollar hedge fund managers lagged their smaller peers returning 5.47% in 2020, seeing performance-based losses of US$17.8 billion whilst seeing net capital outflows of US$48.9 billion. Performance varied among the billion dollar group with the Top 10% of billion dollar club managers seeing annual average returns of 19.50% whilst the Bottom 10% saw decline of 10.67%

Assets under management for the global hedge funds declined by US$64.8 billion throughout the year, driven by US$83.5 billion of net investor redemptions, partially offset by US$18.7 billion of performance-based growth. In Q1 2020, the industry recorded US$178.2 billion of performance-based decline, which was the sharpest quarterly AUM decreased in history, while net investor redemptions stood at US$85.9 billion over the same period.

Global hedge funds recorded 777 closures in 2020

Global hedge funds recorded 777 closures in 2020 down from 852 liquidations in 2019, despite the tough trading conditions in the earlier months of the year. The global hedge fund industry logged 318 closures in Q1 2020 compared to 438 in Q4 2008. On the other hand, the industry witnessed 502 launches over the year, which was the lowest level since 2000.

The Eurekahedge Greater China Hedge Fund Index was up 3.67% in December, bringing its 2020 return to 32.54% which marks its best annual performance since 2009. In the same vein, Greater China mandate also reached a new milestone as their total AUM increased to US$88.0 billion from US$67.8 billion since end-2019. This has come from both performance-based growth and investor allocations of US$12.4 billion and US$7.8 billion respectively, which were the strongest annual numbers being recorded.

The Eurekahedge Long Short Equities Hedge Fund Index was up 4.08% in December, bringing its accumulative return since end-March to 31.86%. Fund managers' performance was supported by the strong rally of the global equity market driven by the accommodative economic policies and encouraging progress of vaccine development. On a year-to-date basis, long/short equities hedge funds registered their best annual performance since 2009 as they returned 17.01%, with nearly half of their constituents having outperformed the global equity market in 2020.

Emerging markets focused hedge funds post gains of 16.55% in 2020

Emerging markets focused hedge funds posted gains of 16.55% in 2020, seeing a remarkable recovery from their Q1 lows to bounce back with returns of 29.72% over the final nine months of the year. The Top 10% of EM focused managers have posted annual average gains of 40.14% in 2020, outperforming the MSCI EM Index (USD) by 24.22%.

The Eurekahedge Structured Credit Hedge Fund Index was up 3.48% during the month, extending its nine-month trailing return to 24.57% since end-March. In terms of year-to-date return, structured credit hedge funds were down 2.95% as of December 2020, underperforming their fixed income and distressed debt peers who returned 5.38% and 4.02% respectively.

Fund managers focusing on cryptocurrencies were up 21.81% in December as tracked by the Eurekahedge Crypto-Currency Hedge Fund Index, supported by the robust performance of Bitcoin which was up 58.82% and trading at the US$28,000 level - soaring above its 2017 peak. Looking at year-to-date return, cryptocurrency hedge funds are up 185.75%, compared to the 296.74% return of Bitcoin in 2020.

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