Eurekahedge: Hedge Fund Down -1.64%, the worst monthly loss since May 2010

The average return of the global hedge fund industry was pulled into negative territory in February as markets experienced sharp reversals, with trend following CTA/managed futures and long/short equities strategies lagging behind the pack, according to a Eurekahedge report.

Hedge funds registered their first monthly loss of the year with the Eurekahedge Hedge Fund Index down 1.64% in February as volatility levels spiked across the board and unravelled the volatility risk premium trade. Despite steep losses during the month, hedge funds have protected on the downside and managed to outperform underlying markets as the MSCI AC World Index (Local) declined 3.68% in February.

Key highlights from Eurekahedge’s February Report:

• Hedge funds lost 1.64% in February though outperforming underlying markets as represented by the MSCI AC World Index (Local) which was down 3.68% over the same period.
• On a year-to-date basis, managers gained 0.34% while underlying markets were down a modest 0.03%.
• CTA/managed futures hedge funds posted their worst monthly return on record, down 4.49% in February with underlying trend following and commodity focused strategies declining 7.85% and 1.27% - upending the gains posted by dedicated FX focused strategies which were up 1.26% during the month.
• Among developed market mandates, North American managers posted the steepest losses during the month, down 1.34% followed by Japanese and European managers which posted losses of 1.23% and 0.73% respectively.
• The Eurekahedge Billion Dollar Hedge Fund Index which tracks the performance of the hedge fund industry heavy weights was down 1.96% in February, their steepest monthly loss on record since the infamous May 2010 flash crash when billion dollar hedge funds lost 2.01%.
• Asia ex-Japan mandated hedge funds posted the steepest decline among regional mandates during the month, down 2.11% with underlying Greater China hedge fund managers down 3.05%.
• Long/short equity funds focused on the region declined 3.41% as Chinese equity markets came under pressure during the month led by weaknesses in the ‘financials’ sector.
• The CBOE Eurekahedge Short Volatility Hedge Fund Index declined 3.90% in February based on early numbers, with asset-weighted losses for the index coming in at 8.65% and expected to increase as the complete picture emerges. Meanwhile, tail risk and long volatility focused strategies are up 6.16% and 0.90% on an asset weighted basis.
• The Eurekahedge Crypto-Currency Hedge Fund Index declined 16.83% in February, bringing its year-to-date losses to 24.36%, barely ahead of the 26% decline in the price of Bitcoin in the first two months of 2018.

Eurekahedge’s data was based on 42.55% of funds which have reported February 2018 returns as at 13 March 2018. The company tracks asset flows, hedge fund performance and regional key trends across the hedge fund universe, measuring more than 130 data points on more than 24,000 alternative funds in its database.