Hedge funds struggle as asset weighted returns turn negative for the year

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Cayman Compass is the Cayman Islands' most trusted news website. We provide you with the latest breaking news from the Cayman Islands, as well as other parts of the Caribbean.

Despite record-high industry assets under management of about $3.2 trillion, the hedge fund industry is struggling. New fund launches are on track to hit the lowest figure in two decades, according to data provider Preqin, and net inflows in the industry since the end of 2016 have equaled just $7.8 billion, Hedge Fund Research data shows.

The rising popularity of passive investing and low interest rates since the financial crisis have presented significant challenges for hedge funds as the performance of the industry as a whole has lagged behind that of stocks.

On an asset weighted basis, hedge funds were down 0.83 percent in August and have declined 1.89 percent for the year, according to the Mizuho Eurekahedge Hedge Fund Index.

The Eurekahedge Hedge Fund Index was flat-to-marginally positive at 0.05 percent during the month of August, trailing behind the MSCI AC World Index which gained 1.06 percent during the month.

North America-focused funds gained 0.84 percent in August, with underlying long-short equities focused managers up 1.57 percent during the month, Eurekahedge reported in a flash update. European fund managers meanwhile posted losses of 0.28 percent in August, reducing their year-to-date gains to 0.41 percent.

Trade tensions between the U.S. and China weighed on the market sentiment in Asia, as fund managers there posted a third consecutive month of losses.

Emerging markets as a whole remained under pressure given the growing strength of the U.S. dollar.

Less than half of the funds (47.6 percent) represented in the Eurekahedge Hedge Fund Index were in positive territory by the end of August, with 10.8 percent of these managers posting double-digit gains year-to-date.

Only North American mandates have done relatively better and are up 3.16 percent for the year, while across strategies, distressed debt and relative value top the tables, gaining 8.20 percent and 3.93 percent respectively for the year, Eurekahedge reported.

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