Hedge fund performance improved in 2017

The average hedge fund returned 7.27 percent through November of last year, almost doubling the performance of 2016, according to the Eurekahedge Hedge Fund Index.

Comparable equity market benchmarks like the MSCI world equity index had a record year, following 13 consecutive months of gains that added $8 trillion and 22 percent to the market value of the stock index in 2017.

Industry assets grew by US$188.2 billion during the year, with about half of the growth coming each from investor inflows and performance-based gains. In 2016, assets under management contracted by $20 billion, when investor redemptions of $55.1 billion outpaced performance-based gains of only $35.1 billion.

About three-quarters of all hedge fund managers posted positive returns in 2017, the highest share since 2013. The majority of them are long-short equity funds.

Around 29 percent of the managers have posted gains exceeding 10 percent last year, while 6 percent of the managers have posted losses exceeding 10 percent.

Fund closures continued to outpace launch activities for the second consecutive year with 490 funds liquidating in 2017 compared with 451 start-ups for the year. Asia and North America have seen a net growth in the number of funds, whereas Europe witnessed a decline for the third year running.

Asia ex-Japan investing funds have delivered the best returns globally and were up 19.89 percent for the year. Within the region, Greater China-mandated hedge funds jumped 28.27 percent in 2017, outperforming the CSI 300 Index by 7.24 percent.

North American hedge funds were up 5.66 percent last year and received the highest investor allocations among all regional mandates with inflows of $58.1 billion, compared to redemptions of $11.1 billion a year earlier. The average performance by new hedge funds launched in 2017 improved to 17.11 percent from 16.52 percent a year earlier, while management fees charged by these funds declined to 1.26 percent from 1.41 percent in 2016.

In Europe, the management fees charged by new funds were as low as 1.15 percent.

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