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Portfolio > Alternative Investments > Hedge Funds

Hedge Funds Treaded Water in August: Eurekahedge

By Michael S. Fischer

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Hedge funds eked out a 0.05% gain on the Eurekahedge Hedge Fund Index in August, bringing their year-to-date return to 0.4%.

This compared with a return of 3.7% for the first eight months of 2018 for the MSCI AC World Index (Local). One in five hedge funds have outperformed this benchmark, according to Eurekahedge.

On an asset-weighted basis, hedge funds were down 0.8% in August and had declined 1.9% for the year as captured by the Mizuho Eurekahedge Hedge Fund Index (USD).

Distressed debt hedge funds were the outstanding performers by a wide margin in August, returning 2.2%. This brought their year-to-date return to 8.2%, the highest among all strategies.

CTA/managed futures hedge funds rebounded with a 1% gain in August. Underlying trend-following strategies were up 2.7%, offsetting losses 0.3% for foreign exchange-focused managers and 1.5% for commodity-focused ones.

AI hedge fund managers — those whose trading processes use artificial intelligence and machine learning theory — posted their fifth monthly loss in August, down 0.4%. The Eurekahedge AI Hedge Fund Index is down 2.6% for the year following a gain of 8.4% in 2017.

The Eurekahedge Crypto-Currency Hedge Fund Index, which tracks hedge funds that invest in crypto assets, took a big hit in August, down 13.1%, as Bitcoin, Ethereum and Ripple fell by 9.2%, 37.5% and 23.3%. For the year to date, cryptocurrency hedge fund managers are down 52.8%, underperforming the Bitcoin price index, which declined by 49.4% over the same period.

Regional Indexes

North American fund managers topped the table among geographic mandates, gaining 0.8% in August and raising their year-to-date return to 3.2%. Eurekahedge noted that underlying equity-focused strategies were up 5.6% for the year as U.S. markets pushed higher on an increasingly tech sector-focused climb.

Hedge fund managers focused on greater China posted their third consecutive monthly loss in August, down 3.7% and down 6% for the year to date. According to the report, the Eurekahedge Greater China Hedge Fund Index lost 9.9% in the three months through to August as trade tensions increased.

A rising U.S. dollar, continuing trade tensions and the Turkish lira took their toll on emerging market sentiment in August, sending the Eurekahedge Emerging Markets Hedge Fund Index down 2.3%. Year to date, the index is up 3.1%.

Managers invested in Turkey lost 19.5% in August according to preliminary estimates, while India-focused hedge funds gained 1.9% gain even as the Indian rupee came under pressure during the month — still, underlying managers remained in the red for the year, down 2.1%.

Here is how other regional indexes performed:

  • Europe: -0.3% in August; 0.4% year to date
  • Japan: 0.1%; -2.4%
  • Asia ex-Japan: -0.2%; -1.6%
  • Eastern Europe and Russia: -4.4%; -8%
  • Latin America: -2.8%; 0.6%

Michael S. Fischer

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