The market correction and short selling advantage of many funds placed hedge funds surpassing the MSCI World Index by over 3% in January, with almost 90% of fund managers outperforming underlying markets during the month. Fund of hedge funds outperformed underlying single managers for the first time ever, up 8.09% in 2013 – and their best performance in the last four years [editor note: not sure how that works].
With concern building about the longevity of the current cycle, Long/Short equities hedge funds recorded their 14th consecutive month of positive net-flows, with investors allocating US$4.4 billion to the strategy in January this year. CTA/managed futures strategy recorded net outflows of US$7.9 billion in 2H 2013 as trend following strategies ended 2013 in negative territory.
Despite weak equity returns, distressed debt hedge funds delivered the best returns during the month – up 2.05% with the Eurekahedge North America Distressed Debt Hedge Fund Index gaining 3.25% in January. As such, it would continue to suggest that the S&P performance in January was more correlated to equity valuations as opposed to general market weakness.
Meanwhile, average hedge fund management and performance-based fees for new launches dropped to 1.4% and 16.0% respectively in 2013. Funds continue to struggle to maintain 2/20 structures without a significant track record tailwind supporting them.
The benchmark Eurekahedge Hedge Fund Index was down 0.48% in January, while the MSCI World Index declined 3.74% over the month. Total AUM decreased by $4bn during the month on performance-based losses of $5.9bn while registering net asset in-flows of $1.9bn. The total size of the industry now stands slightly above $2 trillion.
