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Hedge funds outperform amid market volatility

by LLB Editor
23rd Feb 21 12:01 pm

Hedge fund managers were up 0.54% in January – outperforming the global equity market as represented by MSCI ACWI which gained 0.43% during the month.

The top 10% of global hedge funds generated an average return of 4.72% during the month, while 56.0% of total constituents have outperformed the broader equity market.

In terms of annual return, 2020 was a notable year for the industry as they recorded 12.11% – their best annual performance in over a decade, despite having their worst start in the early part of the year.

Final assets under management for the global hedge funds declined by US$54.1 billion throughout 2020, driven by US$37.4 billion of performance-based growth, heavily offset by US$91.5 billion of net investor redemptions.

The industry has managed to recover from its largest performance-based decline of US$178.2 billion suffered in Q1 2020 as they racked up an accumulated performance-based growth of US$215.6 billion over the last three quarters of 2020. On the other hand, net investor flows ended the year in red as global hedge funds accumulated total net outflows of US$5.6 billion over the last nine months which added to their recorded net outflows of US$85.9 billion reported over the first three months.

The market breakdown in the early part of the year resulted in global hedge funds recording 910 closures in 2020 – the highest annual numbers since 2012. The industry logged 318 closures in Q1 2020 compared to 438 in Q4 2008. On the other hand, the global hedge fund industry witnessed 538 launches throughout the year, which was the lowest level since 2000.

  • The Eurekahedge Long Short Equities Hedge Fund Index was up 0.95% in January, outperforming the S&P 500 by 2.05% during the month. In terms of yearly return, the mandate recorded their third double-digit annual return over the last four years, with their 13.25%, 11.86% and 17.70% return in 2017, 2018 and 2020 respectively. In the same year, long/short equities funds also consistently outperformed their major strategic peers, supported by the strong performance of the global equity market.The Eurekahedge Greater China Hedge Fund Index was up 4.02% in January, outperforming the Shenzhen and Shanghai Composite by 3.78% and 3.73% respectively. In terms of annual return, the Greater China mandate had an exceptional performance in 2020 as they gained 35.48%, with the top 10% of hedge funds gaining an average return of 80.54%. In the same vein, the assets under management of the Greater China mandate grew to US$89.7 billion from US$67.8 billion since end-2019 – recording the bestAUM growth of 32.3% since inception.

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