Hedge funds globally have weathered the first eight months of this calendar well, delivering higher returns than the benchmark equity indices. India once again proved to be a high-beta market for hedge funds and managed to show a stronger growth in assets under management (AUM) when compared with other countries.
According to global alternative asset data provider Eurekahedge, the hedge fund industry grew by $13.4 billion in August, taking the total industry size to $1.54 trillion. Concern regarding slowing growth in global economy and European sovereign debt kept equity prices subdued this year with the MSCI World Index delivering YTD loss of 7.2 per cent up to August this year.
Eurekahedge hedge fund index was up 1.7 per cent in this period. Indian equities have once again proved to be more lucrative than other markets for the hedge fund industry. Top gainer Eurekahedge India index was the top gainer among the geographical indices with 5.7 per cent gain between January and August. This is higher than the return of MSCI India which was up only 1.8 per cent. Other out-performers among the geographical indices were Latin America (onshore) index with 4.9 per cent gain and Eastern Europe and Russia index that is up 3.7 per cent in the first eight months of this year.
The underperforming regions were Australia/New Zealand and Greater China. If asset allocation based on geographies is considered, 66 per cent of hedge fund investments are in North America. Asia ex-Japan accounts for only $103 billion of the total hedge fund AUM or about six per cent. Strategies Maximum assets are invested in long/short equity funds that account for $472 billion of the total assets.
Other popular strategies are multi-strategy funds, event driven funds and CTA/Managed futures. Hedge fund investments in India are however mainly in long/short equity funds and multi-strategy funds. It is therefore not surprising that the return on these funds fluctuated with the movement in equity markets. While Eurekahedge India index gained 4.9 per cent in March and 3.7 per cent in April, it recorded a steep loss of 5.8 per cent in the May correction.