The performance of hedge funds recovered in November, with Eurekahedge Hedge Fund Index gaining 1.4 percent, after two consecutive months of losses. However, the global hedge fund index trailed its benchmark equity MSCI World Index, which was up 2.34 percent.
Hedge funds were up 4.66 percent for the year-to-date compared to MSCI World Index gains of 7.65 percent during the same period.
Data provider Eurekahedge expects the index to be broadly flat in December and finish in the 4 percent to 5 percent range for 2014.
Total assets under management of the industry increased by US$117 billion in 2014. This was considerably less than in 2013 when industry assets grew by US$240 billion. Net asset inflows of US$40.8 billion for the year represent only about one-third of the inflows recorded in 2013. While the industry attracted inflows of US$75.8 billion during the first half of the year, the second half saw net outflows of US$35 billion to date.
In terms of investment mandates, CTA/managed futures saw the best performance of 3.76 percent in November, benefiting in particular from energy futures shorting the oil price. It is also the best investment strategy for the year, up 9.05 percent. Macro, multi-strategy and long/short equities were also up 1.56 percent, 1.13 percent and 0.95 percent, respectively, in November as risk assets such as stocks appreciated on expectations of further easing from the Bank of Japan and the European Central Bank, Eurekahedge said. Managers also reported gains from their short yen/long dollar and long bond positions.
Asian managers posted the best returns in November among all regional mandates, with Japan-focused managers finishing the month up 1.79 percent, while Asia ex-Japan funds were up 1.28 percent, especially those with exposure to Chinese equity markets as the CSI 300 index jumped 11.98 percent for the month.
For the year, funds investing in Asia – excluding Japan – showed the best returns globally with 8.54 percent, outperforming comparable equities in the MSCI Asia ex Japan index by more than 400 basis points.
Hedge funds investing in India reported a 10th consecutive month of investment gains. In particular, long-short equity strategies had an exceptional performance in India, gaining 54.44 percent in the year to date. Overall, Indian hedge funds are the top performers with gains of 40.62 percent.
Managers investing with a Latin American mandate made a small gain of 0.30 percent last month, outperforming the MSCI Latin America Index, which lost 0.53 percent.
European managers, in turn, continue to struggle with returns of just 1.21 percent for the year and significant investor withdrawals of US$14.8 billion in the second half of 2014. It was the second highest redemption amount for a second half year since 2011 when investors redeemed US$38.3 billion.
Due to geopolitical tension and sanctions against Russia, Eastern Europe and Russia mandated funds were down 17.69 percent for the year – the worst result of all regional mandates.
The declining oil price and falling ruble caused the Eurekahedge Eastern Europe & Russia Hedge Fund Index to drop 1.28 percent in November, but funds still outperformed the Russian RTS stock index, which fell 10.74 percent during the month.