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Impact Investing

IPE special report May 2018

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Strong FoF summer recovery continues

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Riding the recovery wave that began in May and rose in June, global markets continued to yield very good returns for funds of funds all round. The Eurekahedge Global Fund of Funds Index returned 1.6% in July and tentatively is up 0.8% in August
The best performance came from funds of funds allocating to emerging market hedge funds and those focusing on Europe, a trend seen in June as well. For instance, the Eurekahedge All Strategies Emerging Markets Fund of Funds Index rose 3.48% in July. Consider the performance of Eurekahedge equity long/short fund of funds indices in July; the emerging markets index rose a spectacular 4.3%, while the all regions index averaged a very good 2.2%.
The European equity markets continued to rally in July, with the MSCI European Equity Index rising 3.5%. This would explain the healthy returns posted by equity-oriented hedge funds.
The performance of Asian and US funds of funds in July returned similar numbers at 1.7% across all strategies. Both regions benefited from rising equity markets, with Korea leading the pack in Asia. Asia also had the added advantage of abundant liquidity (largely due to asset flows into long-
oriented Asian funds looking to cash in on the rising equity markets). The Yuan revaluation - a marginal 2.1% - did not have any pronounced impact on the markets.
In the US, the worst performance was registered by CTA funds (the Eurekahedge US CTA fund of funds Index was down 3.1% in July). This could be attributed to managers being caught off-guard by the soaring energy prices in the last week of July, as also to the absence of any clear rise-and-fall patterns in commodity markets in general.
Macro (+1.62%) and event-driven (1.45%) funds fared quite well, arguably capitalising on the rising markets as well as the eventful month that July was.
Rajeev Baddepudi is hedge fund analyst with Eurekahedge

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