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China, India contribute to hedge funds underperformance

China, India contribute to hedge funds underperformance

Several Asian hedge fund managers underperformed in September, contributing to losses for the year, according to Eurekahedge data.

Asia ex-Japan hedge fund managers lost 1.8% in September, barely ahead of the benchmark MSCI AC Asia Pacific ex-Japan index, which declined 1.87% over the month in local currency terms.

So far, the Eurekahedge Asia ex-Japan hedge fund index is down 5% for the year, in stark contrast to its positive returns of 20.82% in 2017.

The major contributing factors for underperformance continue to be US-China trade tensions, weak currencies and slowing growth in China. These concerns are expected to remain for the rest of the year.

Greater China managers posted a fourth consecutive month of losses as they ended September down 3.65%. On a year-to-date basis, Eurekahedge’s Greater China index has lost 9.89%.

India-focused managers, meanwhile, recorded their worst month since October 2008, posting losses of 10.26%. As a result, the Eurekahedge India Hedge Fund Index is down 18.38% in US dollar terms for the year.

Regional performance

While hedge funds investing in North America and Europe were also in the red last month, their year-to-date performance is positive, with their respective Eurekahedge indices returning 3.16% and 0.02%.

Japan-focused mandates were also down in September, recording losses of 3.33% year-to-date.

Surprisingly, Eastern Europe and Latin America managers were up in September. ‘[They] ended the month up 1.91% and 1.19% respectively, supported by the rebound in the regions' underlying equity markets following the beating they took back in August,’ Eurekahedge wrote in a report.

Eurekahedge’s Latin American index is up 2.2% for the year, while the Eastern European and Russia index has fallen 8.96%.

Strategies

According to eVestment, another hedge fund data provider, distressed debt funds were the biggest outperformers in September, returning 0.84% in September and 4.92% year-to-date.

Origination and financing funds have been another bright spot for the year, according to an eVestment report.

The funds’ September returns were 0.28% last month, with year-to-date returns for the strategy at 4.33%. Meanwhile, equity long/short funds, which have been popular among wealth managers since the start of the year, lost 0.28% last month.

However, the strategy has generated positive performance of 2.99% on average in the first three quarters of the year. On the other hand, managed futures and market neutral equity strategies have performed badly in 2018, down 2.48% and 0.55% respectively for the year.

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