New York (HedgeCo.Net) – Hedge funds closed the final month of the year in positive territory with the Eurekahedge Hedge Fund Index up another 0.25% in December while the MSCI World Index finished the month down 0.80%.
In 2014 as a whole, hedge funds were up 4.57%, falling behind underlying markets as the MSCI World Index returned 6.79% over the same period. Roughly 18% of the fund managers have posted double digit returns in 2014, down from 35% in 2013.
Key takeaways for the month of December 2014:
- The US$2.14 trillion hedge fund industry grew its asset base by US$125.9 billion in 2014, roughly half of the US$240.4 billion increase recorded in 2013.
- Net investor flows for 2014 were down to US$39.8 billion from US$137.5 billion in 2013, with 2H 2014 seeing investors redeem US$36 billion.
- Asia ex-Japan investing hedge funds outperformed their global peers for the third consecutive year returning 9.39% in 2014 – the highest among all regional mandates.
- CTA/managed futures funds delivered the best performance among all strategic mandates, up 9.60% in 2014 as managers won big on oil and currency futures.
- On a year-to-date basis, Indian hedge funds are the top performers with gains of 39.05% while Eastern Europe and Russia mandated funds delivered the worst results down 22.58% for the year.
2014 on the whole has been a mixed bag – while the US economy continued to recover and post solid job gains, the Eurozone and Japan remain mired in their struggle against anaemic growth. Emerging economies have registered divergent prospects as well, while oil exporting countries such as Russia are battered by the steep decline of the value of oil prices, others such as India are reaping the windfall of lower prices. The Chinese economy is also treading the path of moderation, with annual GDP growth rate hovering around 7% which adds to the overall concern regarding global economic growth.
For hedge funds in December, Eastern Europe and Russia saw their sixth consecutive month of losses as the Eurekahedge Eastern Europe & Russia Hedge Fund Index fell 3.15%, though managing to outperform the Russian RTS stock index which plummeted 18.84%. Further falls in oil prices during the month continued to put heavy pressure on the heavily oil dependent Russian economy and the rouble, prompting the Russian central bank to make a drastic overnight interest hike to 17% to defend its currency. Latin American managers were also down 1.61%, negatively impacted by the broad sell-off in commodities and local currencies as the MSCI Latin America Index4 dropped 5.82%. On the other hand, Asia ex-Japan focused hedge funds posted the best returns of 1.04% in December, with managers reporting strong gains from their exposure to Chinese counters. The China CSI 300 Index rocketed 25.81% during the month amid a raging bull market which was sparked off by the interest rate cuts last month, improving property market and improved investor access from the Shanghai-Hong Kong stock connect. Mangers investing with a Japan mandate also made strong gains of 1.00% in December, outperforming the benchmark Nikkei 225 which lost 0.05%.
