Event Driven Down for Year as Hedge Funds Lose for Third Month

From Eurekahedge Pte of Singapore


Hedge funds posted their third consecutive month of losses with the Eurekahedge Hedge Fund Index down 1.75%1in August while the MSCI World Index2lost 6.66% during the month as fears over China’s economic outlook intensified with global equity markets seeing broad based declines. Despite the setback, hedge funds have outperformed underlying markets as represented by the MSCI World Index by 5.06% over the last three months.

On a year-to-date basis, hedge funds are up 1.36%, which compares with a gain of 4.07% seen over the same period last year.

Key takeaways for the month of August 2015:

  • Hedge funds preserved their 2015 gains and outperformed underlying markets as represented by the MSCI World Index by 5.06% over the last three months. On a year-to-date basis, hedge funds are up 1.36% while underlying markets are down by 1.90%.
  • Among developed market investment mandates, Japanese and European managers lead with year-to-date gains of 5.70% and 4.36% respectively.
  • The CBOE Eurekahedge Tail Risk Hedge Fund Index was the best performing strategic mandate in August 2015, up 4.44% during the month.
  • North America mandated hedge funds posted their worst monthly loss since 2011, down 2.03%. On a year-to-date basis, they are up 0.31% while the S&P500 and DJIA are down 4.21% and 7.27% respectively.
  • Greater China investing hedge funds have preserved their gains from earlier during the year and are up 3.22% year-to-date, outperforming the CSI 300 Index by almost 8%. Long-only funds investing with a China mandate are down 11.67% in August while the hedged strategies declined 6.55%.
  • On a year-to-date basis Asia ex-Japan mandated hedge funds are up 4.45% and have outperformed the MSCI AC Asia ex Japan Index by almost 12%.

Main Indices

Eurekahedge Main Indices Aug 20151 2015 Returns 2014 Returns
Eurekahedge Hedge Fund Index -1.75 1.36 4.44
Eurekahedge Fund of Funds Index -2.54 0.50 3.45
Eurekahedge Long-only Absolute Return Fund Index -6.26 -2.86 3.45
Eurekahedge Islamic Fund Index -3.89 -2.13 2.62


Index of the Month Aug 20151 Last 3 Months 2015 Returns 2014 Returns Annualised Returns Constituents
CBOE Eurekahedge Tail Risk Hedge Fund Index 4.44 0.41 -5.06 -3.22 -3.00% 9


Most strategic mandates, with the exception of tail-risk strategies ended the month of August in the red. China’s move to de-value its currency rattled equity markets globally which trended downwards over fears of a China-led global economic slowdown. Volatility levels spiked during the month with commodities and emerging market currencies trading lower during the month. This in tandem with a potential rate hike by the US Fed later in September adds to serious worries about the strength of the global economic recovery, although given the events over the last few months it is likely that the fabled rate hike will continue to elude us. Long/short equities were down 1.99% in August amid the biggest equity market sell-off in four years, with Asia ex-Japan long/short equity managers seeing the steepest declines, down 4.49%. Hedge funds strategies taking a short view on volatility saw the biggest losses among hedge fund strategies, down 3.40% during the month as volatility levels as denoted by the VIX Index broke past the 40 mark. This development however worked to the favour of tail-risk strategies, with the Eurekahedge Tail Risk Hedge Fund Index up 4.44%, posting its strongest monthly return since May 2012. CTA/managed futures strategies, which had earlier posted gains in July were down 2.21% in August, with managers realising losses on equity market futures as well giving back some of their gains from short position in energy as oil prices saw a surprise rebound towards the month end. Fixed income strategies were also hurt during the month, down 1.14% as risk averse investors piled into short term US treasuries with managers realising losses from their short bets on these debt securities.

Strategy Indices

Eurekahedge Strategy Indices Aug 20151 2015 Returns 2014 Returns
Eurekahedge Arbitrage Hedge Fund Index -0.57 3.08 2.76
Eurekahedge CTA/Managed Futures Hedge Fund Index -2.21 -1.13 9.16
Eurekahedge Distressed Debt Hedge Fund Index -0.94 -0.72 0.37
Eurekahedge Event Driven Hedge Fund Index -2.59 -0.46 2.54
Eurekahedge Fixed Income Hedge Fund Index -1.14 0.51 3.43
Eurekahedge Long Short Equities Hedge Fund Index -1.99 3.11 3.40
Eurekahedge Macro Hedge Fund Index -0.79 0.87 3.92
Eurekahedge Multi-Strategy Hedge Fund Index -1.56 1.65 4.30
Eurekahedge Relative Value Hedge Fund Index -1.48 0.99 3.06
The CBOE Eurekahedge Long Volatility Hedge Fund Index -1.27 -2.34 1.58
The CBOE Eurekahedge Relative Value Volatility Hedge Fund Index -3.02 1.84 -0.36
The CBOE Eurekahedge Short Volatility Hedge Fund Index -3.40 1.29 4.47
The CBOE Eurekahedge Tail Risk Hedge Fund Index 4.44 -5.06 -3.22


1 Based on 31.38% of funds which have reported Aug 2015 returns as at 8 September 2015
2 MSCI AC World Index (Local)