Hedge funds attract more than US$30B in first quarter

Hedge funds finished the first quarter of the year with another month of negative returns, down 0.18 percent in March as managers navigated through a choppy start to the year, data provider Eurekahedge reported.

However, strong returns posted by fund managers in the previous month saw them through with the Eurekahedge Hedge Fund Index up 1.05 percent in the first quarter 2014, outperforming the MSCI World Index, which has gained 0.67 percent over the same period.

North American and European fund managers showed stronger performance with returns of 2.50 percent and 1.63 percent, respectively, as global hedge funds were up 1.05 percent in the quarter overall.

The industry attracted US$32.6 billion in net asset inflows over the period, with the main capital allocations going to North American managers ($17.7 billion) and European managers ($13.6 billion).

Global markets remained largely flat-to-negative during the month as better-than-expected U.S. jobs data and the reduction of the Fed’s monthly asset purchase program by another $10 billion heightened concerns that U.S. interest rates could rise faster than previously anticipated, Eurekahedge said. 

“However, investor sentiment improved towards the month end as Fed chairperson Janet Yellen shifted the focus of her “forward guidance” away from an unemployment target toward a more qualitative improvement in the U.S. labor market – a move that will give the Fed more flexibility to influence rates until a sound economic recovery is ensured,” Eurekahedge said.

Meanwhile, European markets trended downward as fears over disinflation re-surfaced in the eurozone, while in Asia, markets declined on news of disappointing PMI data from China and an impending sales tax hike in Japan, according to the data provider. Emerging economies continued to show signs of stability with the MSCI Emerging Market Index advancing 1.69 percent during the month as major emerging market currencies stabilized. 

Regional indices

Most regional mandates ended the month in negative territory, with Eastern Europe & Russia investing hedge funds seeing the strongest decline – down 2.54 percent as tensions between Russia and the West weighed on market sentiment. 

The Eurekahedge Japan Hedge Fund Index dropped 0.84 percent, with long/short equities managers in the region posting losses as the Tokyo Topix declined 0.72 percent during the month on the back of an appreciating yen. 

Asia ex-Japan investing hedge funds were down 0.24 percent, with managers focused on the Greater China region posting strong losses, declining by 3.47 percent. 

European managers were also down 0.34 percent but managed to outperform underlying markets as the MSCI Europe Index declined 0.98 percent during the month. 

North American managers posted gains of 0.45 percent and outperformed the MSCI North America Index which was up 0.38 percent during the month. 

The Eurekahedge Latin America Hedge Fund Index posted the strongest gains, up 1.53 percent as Brazil’s Ibovespa climbing 7.13 percent in March on the prospects of a more pro-market economic policy taking shape in the country, Eurekahedge said. 

Emerging market focused hedge funds also ended the month in positive territory, up 0.67 percent.

Strategy indices

Returns across investment strategies were mixed, with relative value, multi-strategy and fixed income hedge funds delivering the best returns, gaining 0.85 percent, 0.52 percent and 0.39 percent respectively. 

Distressed debt investing funds posted their ninth consecutive month of positive returns – up 0.25 percent.

The industry attracted US$32.6 billion in net asset inflows over the period.

Senate Yellen

FILE – In this Nov. 14, 2013 file photo, Janet Yellen, of California, smiles as she is introduced as being the first female to be nominated as Federal Reserve Board chair, prior to testifying on Capitol Hill in Washington. Yellen was approved by the Senate on Monday, Jan. 6, 2014, as the first woman to head the Federal Reserve in its 100-year history. (AP Photo/Jacquelyn Martin, File)

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