THE EUREKAHEDGE REPORT

DECEMBER 2020

Asset Flows Update 3

Hedge Fund Performance Commentary 10
Key Trends in European Hedge Funds 18
Top 10 Tables 37
Index Return Matrix 40
THE EUREKAHEDGE REPORT AUGUST 2016 1
 GRAPHIC
INFO
INFOGRAPHIC SUMMARY OF EUROPEAN HEDGE FUNDS

EUROPEAN HEDGE FUNDS AUM (2005 – 2020 YTD) US$53.8 billion investor outflows in 2019
US$20.9 billion investor outflows in 2020 YTD

US$441 billion AUM 72% AUM IN GLOBAL Net Flows

30 Performance
20
40% % change of year-on-year AUM
10
0
20%
-10

0% -20
-30
-20% -40
-50
-40% -60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2019 2020 YTD
YTD
Source: Eurekahedge Source: Eurekahedge

LAUNCHES AND CLOSURES SINCE 2008

600 Number of Launches
Number of Closures

400

200

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Eurekahedge

AUM BY INVESTING GEOGRAPHY, 2020 NUMBER OF FUNDS BY DOMICILE, 2020

Cayman Islands
Global
Luxembourg
Europe 25%
Ireland

Emerging Markets United States

British Virgin
Middle East & Africa
72% Islands
France
Eastern Europe & Russia
Others
Source: Eurekahedge Source: Eurekahedge

NUMBER OF FUNDS BY FUND SIZE, 2020 NUMBER OF FUNDS BY HEAD OFFICE LOCATIONS, 2020

United Kingdom
Less than or equal to
US$100 million Switzerland

38% United States

US$101-500 million France

55% South Africa

Sweden
More than US$500 million
Others

Source: Eurekahedge
Source: Eurekahedge

BEST AND WORST STRATEGIC MANDATES, 2020 BEST AND WORST REGIONAL MANDATES, 2020

Multi-
CTA/Managed Strategy
Futures Arbitrage (10.39%)
2020 YTD

2020 YTD

(9.77%) 1.35% Relative

Value
6.48%

-10% -8% -6% -4% -2% 0% 2% -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8%
Source: Eurekahedge Source: Eurekahedge

THE EUREKAHEDGE REPORT DECEMBER 2020 2

 ASSET FLOWS

ASSET FLOWS UPDATE

Introduction
“The Eurekahedge Hedge The Eurekahedge Hedge Fund Index was up 4.50%1 in November 2020 on the back of the
robust performance of the global equity market as represented by the MSCI ACWI2 which
Fund Index was up gained 11.63% over the same period. Global equities reacted positively to the relatively
4.50% in November smooth conclusion of the US presidential election and better-than-expected results of the
effectiveness of the COVID-19 vaccines, eclipsing worries about the near-term economic
2020 on the back of the outlook. In Europe, despite the reimposition of restrictive lockdown measures across many
robust performance of countries in the region to curb the increasing number of new COVID-19 infections,
European stock indices rallied strongly as news of the better-than-expected efficacy of
the global equity several vaccine candidates led to optimism that the worst of the pandemic could soon be
market as represented over. The FTSE 100 and DAX Index rebounded strongly in November, gaining 12.35% and
15.46% respectively, reversing the steep losses suffered in October when they lost 4.92%
by the MSCI ACWI which and 9.44% respectively. Over in the US, the successful election of Joe Biden as the 46th
gained 11.63% over the president of the United States drove a risk-on mood in markets as investors looked forward
to greater certainty and a more diplomatic and multilateral approach in foreign policy
same period.” matters. The better-than-expected news on COVID vaccine development added fuel to the
post-US election rally with the DJIA and S&P500 ending November with a gain of 11.84% and
10.75% respectively. Returns were positive across geographic mandates in November, with
“Preliminary data for North American fund managers up 6.46%, outperforming their Asia ex-Japan peers who
November estimates were up 5.41%. European fund managers were also up 4.27% in November. Across
strategies, long/short equities, event driven and multi-strategy fund managers were up
that the global hedge 6.88%, 6.06% and 3.71% respectively throughout the month as the strong performance of
fund industry witnessed the global equity market supported the performance of these strategies.
US$26.3 billion of Final asset flow figures for October showed that hedge fund managers recorded
performance-driven performance-based losses totalling US$7.2 billion and net investor redemptions of US$12.1
billion throughout the month. Preliminary data for November estimates that the global
gains combined with hedge fund industry witnessed US$26.3 billion of performance-driven gains combined with
US$8.8 billion of net US$8.8 billion of net investor outflows. The assets under management (AUM) of the global
hedge fund industry stood at US$2,166.6 billion as of end-November 2020. The global
investor outflows.”
hedge funds industry has seen US$38.4 billion of performance-based decline and US$97.7
billion of investor redemptions over the first 11 months of 2020.
“North American funds
Figure 1a: Summary monthly asset flow data since January 2013
recorded performance- 2,800 60
based gains of US$15.1 40
2,600 20
billion on top of US$4.2
Total assets in US$ billion

Asset flow in US$ billion
0
billion of net investor 2,400
(20)
inflows during the 2,200
(40)
(60)
month of November.” (80)
2,000
(100)
“Fund managers 1,800 (120)
(140)
utilising long/short 1,600 (160)
equities strategies Jan‐13 Oct‐13 Jul‐14 Apr‐15 Jan‐16 Oct‐16 Jul‐17 Apr‐18 Jan‐19 Oct‐19 Jul‐20

posted the biggest Source: Eurekahedge

Performance‐based growth Net asset flows Total assets

performance-based
Key highlights for the month of November 2020:
gains and net investor
inflows of US$10.9  Hedge fund managers recorded their strongest return since 2009 and were up 4.50%
in November, supported by the strong performance of the global equity market as
billion and US$7.7
represented by the MSCI ACWI (Local) which generated 11.63% return throughout the
billion during the month. On a year-to-date basis, global hedge funds were up 8.09%, with more than 40% of
month respectively.’’ its underlying constituents having underperformed the global equity market over the first
11 months of 2020.

1
Based on 42.60% of funds which have reported November 2020 returns as at 10 December 2020
2
MSCI ACWI (Local)

3 THE EUREKAHEDGE REPORT DECEMBER 2020

 ASSET FLOWS
ASSET FLOWS UPDATE

 Assets under management for the global hedge funds industry have rebounded increasing by US$128.0 billion over the
past eight months since March 2020. This has come from performance-driven gains of US$139.8 billion and net investor
outflows of US$11.8 billion. This marks a sharp recovery following a US$264.1 billion asset decline in Q1 2020.

 North American hedge funds were up 6.46% in November, outperforming their Asia ex-Japan and European peers who
were up 5.41% and 4.27% during the month respectively. In terms of year-to-date performance, Asia ex-Japan and North
American hedge funds generated a double-digit performance of 18.94% and 11.13% respectively, compared to the 1.85%
and -2.13% of their European and Japanese counterparts over the first 11 months of the year.

 The Eurekahedge Greater China Hedge Fund Index was up 5.38% in November, supported by the strong performance of
the region’s equity market as seen from the 9.27% and 5.64% return of Hang Seng and CSI 300. In terms of year-to-date
return, Greater China hedge funds were up 30.69% on track to posting their best annual performance since 2009 with
nearly a quarter of their constituents recording a YTD return in excess of 40%.

 The Eurekahedge Long Short Equities Hedge Fund Index was up 6.88% in November, registering their best monthly
performance since 2000. The strong rally of the global equity market supported the performance of the fund managers
with the DAX and S&P 500 up 15.46% and 10.75% respectively. On a year-to-date basis, long/short equities hedge funds
were up 12.47% as of November 2020, bringing their performance since end-March to 27.08% which marks their best 8-
month performance since the inception of the index.

 Hedge fund managers utilising relative value strategies were up 5.90% in November, recording their best monthly
performance since the inception of the index as reflected in the Eurekahedge Relative Value Hedge Fund Index. On a year-
to-date basis, relative value hedge funds have also done well with an 8.69% gain over the first 11 months of the year,
compared to 6.17% and 4.51% of macro and multi-strategy hedge funds respectively.

 Hedge funds utilising structured credit strategies were up 2.52% in November, recording their eighth consecutive month
of positive return as tracked by the Eurekahedge Structured Credit Hedge Fund Index which rebounded by 20.78% since
end-March after a poor performing first quarter. In terms of year-to-date return, structured credit hedge funds were
down 5.81% as of November 2020, underperforming their fixed income and distressed debt peers who returned 3.42%
and 0.13% respectively.

 Fund managers focusing on cryptocurrencies were up 25.63% in November as tracked by the Eurekahedge Crypto-
Currency Hedge Fund Index, supported by the robust performance of Bitcoin which was up 33.45% and trading around its
2017 peak. Looking at year-to-date return, cryptocurrency hedge funds are up 128.60%, trailing behind to Bitcoin which
returned 149.81% over the first 11 months of 2020.

Figure 1b: Contribution by hedge fund performance and investor flows for the global hedge fund industry since 2006
100% 400
80% 300

Total change in AUM (US$ billion)
60% 200
40%
100
20%
0
0%
(100)
(20%)
(200)
(40%)
(60%) (300)

(80%) (400)

(100%) (500)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Nov
YTD
Performance‐based growth/decline (LHS) Investor flows (LHS) Total change in AUM (US$ billion) (RHS)
Source: Eurekahedge

Figure 1b shows the share by performance-based growth/decline and net investor flows for the global hedge fund industry since
2006. During the pre-financial crisis period, the share of performance-based growth and investor inflows was almost evenly split
with total asset growth coming in at US$343.4 billion. During the financial crisis in 2008, investor outflows accounted for over half
of the total loss of capital for the global hedge fund industry as investors grew nervous over the prospect of their investments.

The years following the financial crisis saw accommodative central bank policies largely on the back of asset purchases and low
interest rates, setting the momentum for an economic recovery. Investor sentiment improved with positive investor inflows in

THE EUREKAHEDGE REPORT DECEMBER 2020 4

 ASSET FLOWS

ASSET FLOWS UPDATE

2010 and 2011 but the height of the Eurozone crisis witnessed further redemptions in 2012 which were less severe than those in
the post-global financial crisis period. In 2013, hedge funds recorded the strongest growth in their AUM since 2007 with assets
increasing by US$240.4 billion during the year on the back of strong performance-based gains and investor inflows.

This happened against the backdrop of a global equity market rally and a recovery in the US economy that saw investors scale up
their allocations to hedge funds. While the Greek and Ukrainian crisis contributed to some investor nervousness in 2014,
investor inflows remained positive with modest performance-driven gains resulting in the industry’s asset growing by half the
levels seen in 2013. In annual year 2016, performance-driven gains of US$35.1 billion were recorded while investor outflows
stood at US$55.1 billion over the same period – the steepest outflows recorded since 2010. Redemption pressure appears to
have eased going into 2017 as investors positive sentiment buoyed allocation activity into hedge funds. Hedge funds recorded
the strongest growth in their AUM since 2014 with assets increasing by US$221.9 billion in 2017 on the back of strong
performance-based gains and investor inflows. Final asset figures for 2017 saw investor inflows of US$114.6 billion of new
allocations accounting for almost 52% of the total hedge fund asset growth recorded during the year while performance-driven
gains of US$107.3 billion were recorded – the highest performance figures since 2010. Meanwhile, in 2018, international trade
conflict between the two largest economies, concerns over slowing global growth and aggressive Fed rate hikes acted as
headwinds to hedge fund performance. As a result, performance-based losses of US$44.2 billion and US$42.5 billion were
recorded in February and October respectively – the highest monthly performance-based losses since October 2008. In 2019,
supported by the robust rallied in the global equity market, the industry recorded its strongest performance-driven gains of
US$137.8 billion since 2007. However, the industry AUM only grew by US$10.3 billion year-on-year, as substantial investor
redemptions totalling US$127.5 billion were recorded throughout the year. As of November 2020 year-to-date, the industry has
recorded performance-driven losses of US$38.4 billion, on top of US$97.7 billion of investor outflows largely driven by the record
asset outflow in the first quarter due to the COVID-19 outbreak, which resulted from the massive sell-off of risk assets in
February and March.

Table 1: Performance-based changes in assets and asset flows in November 2020

Assets at Net growth

Net flows Assets at end % change in assets
start (performance)
Hedge funds 2131.5 26.3 8.8 2166.6 1.65%

By geographic mandate

Asia ex-Japan 171.3 2.9 1.9 176.1 2.84%

Japan 16.0 0.2 0.1 16.3 1.98%

Europe 436.3 7.0 2.2 445.5 2.11%

Latin America 56.2 1.1 0.4 57.7 2.57%

North America 1451.6 15.1 4.2 1470.9 1.33%

By strategic mandate

Arbitrage 199.8 1.0 0.5 201.3 0.77%

CTA/managed futures 206.0 1.1 (0.2) 206.9 0.43%

Distressed debt 50.2 0.0 (0.0) 50.2 0.01%

Event driven 216.1 1.0 0.1 217.2 0.51%

Fixed income 173.3 3.1 2.4 178.8 3.17%

Long/short equities 712.9 10.9 7.7 731.5 2.61%

Macro 146.1 2.5 (1.1) 147.5 0.98%

Multi-strategy 289.9 5.5 (1.0) 294.3 1.54%

Relative value 74.0 0.9 0.3 75.1 1.51%

Others 63.4 0.3 0.1 63.8 0.69%

By fund size (US$ millions)

≤20 21.3 0.2 0.2 21.7 1.83%

>20-≤50 44.4 0.4 0.1 44.9 1.16%

>50-≤100 53.0 0.6 0.5 54.1 2.08%

5 THE EUREKAHEDGE REPORT DECEMBER 2020

 ASSET FLOWS
ASSET FLOWS UPDATE

>100-≤250 235.7 3.1 1.2 240.0 1.84%

>250-≤500 309.9 4.2 1.3 315.4 1.77%

>500-≤1000 449.6 4.7 1.8 456.1 1.43%

>1000 1017.4 13.1 3.7 1034.2 1.65%

Note: All figures are in US$ billion, and rounded off to 1 decimal place Source: Eurekahedge

North American funds recorded performance-based gains of US$15.1 billion on top of US$4.2 billion of net investor inflows
during the month of November. Fund managers focusing on the region have reported performance-based losses totalling
US$44.5 billion in 2020, combined with net investor outflows of US$67.7 billion over the same period. Total assets in North
American hedge funds stood at US$1,470.9 billion as of November 2020.

European fund managers recorded performance-based gains of US$7.0 billion on top of net inflows of US$2.2 billion during the
month. Total assets in European hedge funds stood at US$445.5 billion as of November 2020, below their January 2018 high of
US$577.5 billion. On a year-to-date basis, European hedge fund managers have seen performance-driven losses of US$2.3 billion
while net asset outflows stood at US$22.4 billion over the same period.

Asian funds registered performance-based gains of US$3.2 billion in November combined with US$2.0 billion of net investor
inflows during the month. Total assets for Asian hedge funds stood at US$192.4 billion as of November 2020. In terms of year-to-
date performance, the Pan-Asia mandate saw US$8.9 billion of performance-driven gains partially offset by US$5.3 billion of net
investor outflows over the first 11 months of 2020.

Figure 2: November 2020 asset flow by geographic mandate

16

14

12

10

0
Asia ex‐Japan Japan Europe Latin America North America
Performance‐based growth / (decline) (US$ billion) Net flows (US$ billion)
Source: Eurekahedge

Figure 3: 2020 asset flows by geographic mandate

20
10
0
(10)
(20)
(30)
(40)
(50)
(60)
(70)
(80)
Asia ex‐Japan Japan Europe Latin America North America
Performance‐based growth / (decline) (US$ billion) Net flows (US$ billion)
Source: Eurekahedge

THE EUREKAHEDGE REPORT DECEMBER 2020 6

 ASSET FLOWS

ASSET FLOWS UPDATE

Figure 4 gives a breakdown of performance-based gains and net flows for the hedge fund industry by various strategies for the
month of November. Similar to Figure 2, net allocation activity was mostly positive across the board driven by the market risk-on
sentiment during the month.

Fund managers utilising long/short equities strategies posted the biggest performance-based gains and net investor inflows of
US$10.9 billion and US$7.7 billion during the month respectively. Fund managers benefitted from the strong performance of the
global equity market, with S&P 500 up 10.75% during the month. In the same vein, fixed income managers also recorded both
performance-based gains and net investor inflows of US$3.1 billion and US$2.4 billion respectively, thanks to the robust
performance of the high yielding bond as seen from the 4.00% return of US High Yield Master Index.

On a year-to-date basis, the long/short equities mandate has recorded investor redemptions of US$42.7 billion over the first 11
months of 2020, together with performance-based losses of US$24.5 billion over the same period. On the other hand, only
arbitrage mandates have recorded both investors allocations and performance-based growth of US$11.6 billion and US$8.2
billion over the same period respectively.

Figure 4: November 2020 asset flow by strategy employed

12

10

(2)
Arbitrage CTA/managed Distressed Event driven Fixed income Long/short Macro Multi‐strategy Relative value Others
futures debt equities
Performance‐based growth / (decline) (US$ billion) Net flows (US$ billion)
Source: Eurekahedge

Figure 5: 2020 asset flow by strategy employed

20

10

(10)

(20)

(30)

(40)

(50)
Arbitrage CTA/managed Distressed Event driven Fixed income Long/short Macro Multi‐strategy Relative value Others
futures debt equities
Performance‐based growth / (decline) (US$ billion) Net flows (US$ billion)
Source: Eurekahedge

7 THE EUREKAHEDGE REPORT DECEMBER 2020

 ASSET FLOWS
ASSET FLOWS UPDATE

Table 2: Performance-based changes in assets and asset flows 2020

Assets at Net growth

Net flows Assets at end % change in assets
start (performance)
Hedge funds 2302.6 (38.4) (97.7) 2166.6 (5.91%)

By geographic mandate

Asia ex-Japan 169.7 9.0 (2.6) 176.1 3.78%

Japan 17.1 (0.1) (0.7) 16.3 (4.80%)

Europe 470.2 (2.3) (22.4) 445.5 (5.25%)

Latin America 62.5 (0.5) (4.2) 57.7 (7.67%)

North America 1583.1 (44.5) (67.7) 1470.9 (7.09%)

By strategic mandate

Arbitrage 181.5 8.2 11.6 201.3 10.90%

CTA/managed futures 233.1 (1.1) (25.1) 206.9 (11.24%)

Distressed debt 53.4 (2.9) (0.3) 50.2 (6.00%)

Event driven 227.3 (5.7) (4.4) 217.2 (4.45%)

Fixed income 177.1 4.8 (3.1) 178.8 0.93%

Long/short equities 798.7 (24.5) (42.7) 731.5 (8.41%)

Macro 155.8 0.5 (8.8) 147.5 (5.33%)

Multi-strategy 333.3 (24.7) (14.3) 294.3 (11.69%)

Relative value 71.6 3.7 (0.2) 75.1 4.84%

Others 70.8 3.3 (10.3) 63.8 (9.89%)

By fund size (US$ millions)

≤20 20.8 0.4 0.6 21.7 4.60%

>20-≤50 44.0 1.1 (0.1) 44.9 2.13%

>50-≤100 54.6 0.8 (1.3) 54.1 (0.78%)

>100-≤250 242.2 5.6 (7.8) 240.0 (0.92%)

>250-≤500 320.9 6.4 (11.9) 315.4 (1.71%)

>500-≤1000 473.7 1.1 (18.7) 456.1 (3.72%)

>1000 1146.4 (53.7) (58.5) 1034.2 (9.79%)

Note: All figures are in US$ billion, and rounded off to 1 decimal place Source: Eurekahedge

Figure 6 shows the cumulative investor flows since 2013, with 2H 2016 showing a pronounced decline in investor flows for billion
dollar hedge funds. In 2016, billion dollar hedge funds saw steep investor redemptions for seven consecutive months between
June 2016 and December 2016, totalling US$75.0 billion. Sub-billion dollar hedge funds have also recorded redemptions over the
same period, totalling US$8.8 billion. Redemption pressure eased going into 2017, with billion dollar hedge funds seeing inflows
of US$66.5 billion in 2017. Sub-billion dollar funds also realised an encouraging year, with US$48.1 billion of inflows recorded
over the same period. Throughout 2018, billion dollar hedge funds had seen redemptions totalling US$70.9 billion, while their
sub-billion dollar counterparts recorded net outflows totalling US$22.5 billion over the year. In 2019, despite encouraging
performance-based gains of the billion dollar hedge funds, redemptions continued to put pressure on fund managers as they
recorded US$79.4 billion outflows throughout the year. Billion dollar hedge funds recorded performance-based gains of US$13.1
billion and net investor inflows of US$3.7 billion in November.

THE EUREKAHEDGE REPORT DECEMBER 2020 8

 ASSET FLOWS

ASSET FLOWS UPDATE

Figure 6: Cumulative investor flows since 2013

250  Billion Dollar Sub‐Billion Dollar
Net asset flows (US$ billion) (cumulative)

200 

150 

100 

50 

0 

(50)
Mar‐13

Mar‐14

Mar‐15

Mar‐16

Mar‐17

Mar‐18

Mar‐19

Mar‐20
Jan‐13

May‐13

Jan‐14

May‐14

Jan‐15

May‐15

Jan‐16

May‐16

Jan‐17

May‐17

Jan‐18

May‐18

Jan‐19

May‐19

Jan‐20

May‐20
Nov‐13

Nov‐14

Nov‐15

Nov‐16

Nov‐17

Nov‐18

Nov‐19

Nov‐20
Jul‐13
Sep‐13

Jul‐14
Sep‐14

Jul‐15
Sep‐15

Jul‐16
Sep‐16

Jul‐17
Sep‐17

Jul‐18
Sep‐18

Jul‐19
Sep‐19

Jul‐20
Sep‐20
Source: Eurekahedge

Figures 7 and 8 illustrate performance and net asset flows across the various fund size categories since January 2013. Over the
period depicted below, the global hedge fund industry has raked in performance-based gains of US$370.7 billion. Billion dollar
hedge funds account for nearly half of these gains as they have delivered cumulative performance-based gains of US$183.3
billion since the start of 2013. Looking at net asset flows, the global hedge fund industry recorded US$9.2 billion of net capital
outflows since January 2013. Sub-billion dollar hedge funds recorded net inflows totalling US$9.6 billion, offset by net outflows of
US$18.8 billion recorded by billion-dollar hedge funds.

Figure 7: Performance based gains/losses by fund size

Monthly Performance Flows Cumulative Performance Flows
60
Performance gains / losses (US$ billion)
Performance gains / losses (US$ billion)

30 300
0
(30) 200
(60)
100
(90)
(120) 0
(150) Jan‐13 Apr‐14 Jul‐15
Oct‐16 Jan‐18
Apr‐19
Jul‐20
≤100 >500‐≤1000 >100‐≤500 >1000 ≤100 >100‐≤500 >500‐≤1000 >1000
Source: Eurekahedge (US$ million) Source: Eurekahedge (US$ million)

Figure 8: Net asset flows by fund size

Monthly Asset Flows Cumulative Asset Flows
60
Net asset flows  (US$ billion)

40 300
20
Net asset lows (US$ billion)

0 200
(20) 100
(40)
(60) 0
(80) (100)
(100) Jan‐13 Apr‐14
Jul‐15 Oct‐16 Jan‐18
Apr‐19
Jul‐20
≤100 >500‐≤1000 >100‐≤500 >1000 ≤100 >100‐≤500 >500‐≤1000 >1000
Source: Eurekahedge Source: Eurekahedge (US$ million)
(US$ million)

9 THE EUREKAHEDGE REPORT DECEMBER 2020

 PERFORMANCE
COMMENTARY
HEDGE FUND PERFORMANCE COMMENTARY

Introduction
“The Eurekahedge Hedge The Eurekahedge Hedge Fund Index was up 4.50%1 in November 2020, supported by the
strong performance of the global equity market as reflected by the 11.63% return of
Fund Index was up 4.50% the MSCI ACWI2 during the month. Global equities ended the month in strong positive
in November 2020, territory due to the relatively smooth conclusion of the US presidential election and the
supported by the strong announcement of three vaccines that are effective against COVID-19, eclipsing worries
about the near-term economic outlook. Despite the reimposition of restrictive
performance of the global lockdown measures across many European countries to curb the increasing number of
equity market as reflected new COVID-19 infections, European stock indices rallied strongly as news of the better
by the 11.63% return of than expected efficacy of several vaccine candidates led to optimism that the worst of
the pandemic could soon be over. The FTSE 100 and DAX Index rebounded strongly in
the MSCI ACWI during the November, gaining 12.35% and 15.46% respectively, outperforming their peers in
month.’’ North America and Asia. Over in the US, the successful election of Joe Biden as the 46th
president of the United States drove a risk-on mood in markets as investors looked
forward to greater certainty and a more diplomatic and multilateral approach in
“Roughly 81.8% of the foreign policy matters. The DJIA gained 11.84% in November, reversing its 2020 return
underlying constituents of into positive territory, while the tech-heavy NASDAQ was up 11.80% which extends its
the Eurekahedge Hedge year-to-date return to 35.96%. Returns were mostly positive across geographic
mandates in November. Fund managers focusing in North America were up 6.46%,
Fund Index posted positive outperforming their Asia ex Japan and European peers who returned 5.41% and 4.27%
returns in November.” respectively. Across strategies, long/short equities, event driven and relative value
hedge fund managers were up 6.88%, 6.06% and 5.90% respectively throughout the
month.
“In terms of year-to-date
return, long/short Roughly 81.8% of the underlying constituents of the Eurekahedge Hedge Fund Index
equities hedge funds posted positive returns in November, and 31.5% of the hedge fund managers in the
database were able to maintain double-digit returns over the first 11 months of 2020.
were up 12.47%, with
nearly a quarter of its Figure 1: November 2020 and October 2020 returns across regions
underlying constituents 8%
having generated a year-
to-date return in excess of 6%
20%.”
4%
“Supported by their
strong performance in 2%

November, long/short
equities hedge funds 0%

claimed the first spot

from arbitrage funds by (2%)
North America Europe Japan Asia ex‐Japan Latin America EH Hedge Fund
returning 12.47% over the Index

first 11 months of 2020,

Nov‐20 Oct‐20
Source: Eurekahedge
while arbitrage funds
followed behind with a
Figure 2 illustrates the 2020 performance of hedge fund managers across regions.
return of 8.82%.” Despite the sharp sell-off in the first quarter of 2020 which was the worst quarterly
performance for global hedge funds since inception due to the spread of COVID-19,
most regions have recovered from their deep losses as the global equity market
exhibited a strong rebound since the second quarter of the year, supported by the

1
Based on 42.60% of funds which have reported November 2020 returns as at 10 December 2020
2
MSCI ACWI (Local)

THE EUREKAHEDGE REPORT DECEMBER 2020 10

 PERFORMANCE
COMMENTARY

HEDGE FUND PERFORMANCE COMMENTARY

easing economic policies and encouraging progress of vaccine development. Asia ex-Japan hedge funds claimed the top spot by
recording 18.94% return, thanks to the strong performance of the Asian equity market particularly in the Chinese region. In the
same vein, North American hedge funds followed behind with their 11.13% return, driven by the strong rally of US equities since
end-March. On the other end of the spectrum, European and Japanese hedge funds lagged behind the group as they registered
1.85% and -2.13% return as of November 2020 respectively.

Figure 2: 2020 returns across regions

20%

15%

10%

5%

0%

(5%)
North America Europe Japan Asia ex‐Japan Latin America EH Hedge Fund Index

Source: Eurekahedge

Eurekahedge Asset Weighted Index

The Eurekahedge Asset Weighted Index - USD was up 4.45% in November, reversing its YTD performance into positive territory to
1.84% over the first 11 months of 2020. The strong performance of the equity market and weak US dollar supported the index
performance. It should also be noted that the Eurekahedge Asset Weighted Index is US dollar denominated, and during months of
strong US dollar gains, the index results include the currency conversion loss for funds that are denominated in other currencies.

All of the Eurekahedge asset-weighted indices were up in November, with the emerging market and long/short equities asset-
weighted indices taking the lead by gaining 7.42% and 7.18% respectively, supported by the double-digit performance of the
equity market particularly in Europe and North America. In terms of year-to-date return, Asia Pacific mandates were in the lead,
with their 14.39% return compared to the -8.66% return of the emerging market mandate.

Figure 3a: Eurekahedge Asset Weighted Indices Figure 3b: Eurekahedge Asset Weighted Indices
November 2020 returns 2020 returns
8% 16%

7% 12%
6%
8%
5%
4%
4%
0%
3%
(4%)
2%

1% (8%)

0% (12%)
Nov‐20 2020 YTD
Main Top 100 Asia Pacific Main Top 100 Asia Pacific
Long/Short Equities Multi‐Strategy Emerging Markets Long/Short Equities Multi‐Strategy Emerging Markets

Source: Eurekahedge Source: Eurekahedge

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CBOE Eurekahedge Volatility Indexes

The CBOE Eurekahedge Volatility Indexes comprise four equally-weighted volatility indices – long volatility, short volatility, relative
value and tail risk. The CBOE Eurekahedge Long Volatility Index is designed to track the performance of underlying hedge fund
managers who take a net long view on implied volatility with a goal of positive absolute return. In contrast, the CBOE Eurekahedge
Short Volatility Index tracks the performance of underlying hedge fund managers who take a net short view on implied volatility
with a goal of positive absolute return. This strategy often involves the selling of options to take advantage of the discrepancies
in current implied volatility versus expectations of subsequent implied or realised volatility. The CBOE Eurekahedge Relative Value
Volatility Index on the other hand measures the performance of underlying hedge fund managers that trade relative value or
opportunistic volatility strategies. Managers utilising this strategy can pursue long, short or neutral views on volatility with a goal
of positive absolute return. Meanwhile, the CBOE Eurekahedge Tail Risk Index tracks the performance of underlying hedge fund
managers that specifically seek to achieve capital appreciation during periods of extreme market stress.

The CBOE Eurekahedge Volatility Indexes ended the month of November with mixed returns, with relative value volatility hedge
funds up 2.25%, while long volatility hedge funds were down 5.75%. The market risk-on sentiment contributed to the positive
performance of both relative value and short volatility as seen from the decline of the CBOE Volatility from 38th to 20th level since
the start of the month. In terms of year-to-date returns, the CBOE Eurekahedge Tail Risk Volatility Hedge Fund Index topped the
chart with its 32.23% return, while the CBOE Eurekahedge Short Volatility Hedge Fund Index was up 2.74%, placing them last among
the four volatility strategy categories.

Figure 4a: CBOE Eurekahedge Volatility Indexes Figure 4b: CBOE Eurekahedge Volatility Indexes
November 2020 returns 2020 returns
3% 35%

2%
30%
1%
25%
0%

(1%) 20%

(2%) 15%
(3%)
10%
(4%)
5%
(5%)

(6%) 0%
Nov‐20 2020 YTD
Long Volatility Relative Value Long Volatility Relative Value
Short Volatility Tail Risk Short Volatility Tail Risk

Source: Eurekahedge Source: Eurekahedge

Strategy Performance
All major strategic mandates were up in November with long/short equities and event driven hedge funds in the lead, generating
6.88% and 6.06% respectively. On the other end of the spectrum, CTA/managed futures and distressed debt hedge funds
underperformed their peers with their 1.95% and 1.40% return respectively.

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Figure 5: November 2020 and October 2020 returns across strategies

7%

6%

5%

4%

3%

2%

1%

0%

(1%)
Arbitrage CTA/managed Distressed Event driven Fixed income Long/short Macro Multi‐strategy Relative value EH Hedge
futures debt equities Fund Index
Nov‐20 Oct‐20
Source: Eurekahedge

Looking at 2020 returns, supported by their strong performance in November, long/short equities hedge funds claimed the first
spot from arbitrage funds by returning 12.47% over the first 11 months of 2020, while arbitrage funds followed behind with a
return of 8.82%. On the other hand, fixed income and distressed debt hedge funds lagged behind the group as they returned
3.42% and 0.13% as of November 2020 respectively.

Figure 6: 2020 returns across strategies

14%

12%

10%

8%

6%

4%

2%

0%
Arbitrage CTA/managed Distressed Event driven Fixed income Long/short Macro Multi‐strategy Relative value EH Hedge Fund
futures debt equities Index

Source: Eurekahedge

Arbitrage and relative value

Arbitrage hedge fund managers were up 2.33% in November, with all of their underlying mandates posting positive returns.
North American arbitrage hedge funds were up 2.86%. Looking at year-to-date returns, the Eurekahedge Arbitrage Hedge Fund
Index was up 8.82%, with more than a quarter of its constituents generating a double-digit performance over the first 11 months
of 2020.

Hedge fund managers utilising relative value strategies were up 5.90% in November, with their underlying North American
mandates posting a 10.66% return. In terms of year-to-date returns, the Eurekahedge Relative Value Hedge Fund Index was up
8.69% as of November 2020, with more than half of its constituents having generated year-to-date returns in excess of 10%.

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Figure 7a: Arbitrage and relative value Figure 7b: Arbitrage and relative value
November 2020 returns 2020 returns
12% 16%

14%
10%
12%
8%
10%

6% 8%

6%
4%
4%
2%
2%

0% 0%
Arbitrage Relative value Arbitrage Relative value
All regions North America Europe All regions North America Europe
Asia ex‐Japan Japan Latin America Asia ex‐Japan Japan Latin America

Source: Eurekahedge Source: Eurekahedge

Long/short equities and fixed income

The Eurekahedge Long Short Equities Hedge Fund Index was up 6.88% in November, recording their best monthly performance
since 2000. The positive progress of the COVID-19 vaccine development on top of the encouraging result of the US presidential
elections boosted the performance of the global equity market during the month. All underlying regional mandates recorded a
positive return, with North American and Asia ex-Japan managers up 8.75% and 6.83% respectively. In terms of YTD return,
long/short equities hedge funds were up 12.47%, with nearly a quarter of its underlying constituents generating a YTD return of
above 20%.

The Eurekahedge Fixed Income Hedge Fund Index was up 2.53% in November, with all of its underlying regional mandates in
positive territory. European fixed income hedge funds were up 3.00%, outperforming their North American peers who returned
2.55%. Looking at year-to-date performance, the fixed income managers were up 3.42% as of November 2020.

Figure 8a: Long/short equities and fixed income Figure 8b: Long/short equities and fixed income
November 2020 returns 2020 returns
9% 25%
8%
20%
7%
6% 15%
5%
10%
4%
3% 5%
2%
0%
1%
0% (5%)
Long/short equities Fixed income Long/short equities Fixed income
All regions North America Europe All regions North America Europe
Asia ex‐Japan Japan Latin America Asia ex‐Japan Japan Latin America

Source: Eurekahedge Source: Eurekahedge

Event driven and distressed debt

The Eurekahedge Event Driven Hedge Fund Index went up 6.06% during the month of November, with all underlying regional
mandates generating a positive return. North America, the top regional mandate gained 10.10% throughout the month. On a
YTD basis, event driven hedge funds were up 3.44% as of November 2020, recovering from their 15.48% loss in Q1 of 2020.

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HEDGE FUND PERFORMANCE COMMENTARY

The Eurekahedge Distressed Debt Hedge Fund Index was up 1.40% in November, with its underlying regions generating mixed
returns. North American distressed debt funds gained 2.80%, while Asia ex-Japan distressed debt funds lost 3.48% throughout
the month. In terms of year-to-date return, distressed debt hedge funds were up 0.13%.

Figure 9a: Event driven and distressed debt Figure 9b: Event driven and distressed debt
November 2020 returns 2020 returns
12% 12%

10% 10%

8% 8%

6% 6%

4% 4%

2% 2%

0% 0%

(2%) (2%)

(4%) (4%)
Event driven Distressed debt Event driven Distressed debt
All regions North America Europe All regions North America Europe
Asia ex‐Japan Japan Latin America Asia ex‐Japan Japan Latin America

Source: Eurekahedge Source: Eurekahedge

CTA/managed futures and macro

Hedge fund managers utilising CTA/managed futures strategies were up 1.95% in November, with most of their underlying
regional mandates generating negative returns. European CTA/managed futures fund managers were down 5.42% for the
month, underperforming their North American peers who were up 2.12%. The Eurekahedge CTA/Managed Futures Hedge Fund
Index was up 3.95%, with a quarter of its constituents having generated a double-digit YTD return over the first 11 months of
2020.

The Eurekahedge Macro Hedge Fund Index was up 2.29% in October, with all of its underlying regional mandates generating
positive returns. North American macro hedge funds were up 9.76%, outperforming their European counterparts who ended the
month up 1.87%. On a year-to-date basis, macro fund managers were up 6.17%.

Figure 10a: CTA/managed futures and macro Figure 10b: CTA/managed futures and macro
November 2020 returns 2020 returns
10.0% 24.0%
20.0%
8.0%
16.0%
6.0% 12.0%
8.0%
4.0%
4.0%
2.0% 0.0%
(4.0%)
0.0%
(8.0%)
(2.0%) (12.0%)
(16.0%)
(4.0%)
(20.0%)
(6.0%) (24.0%)
CTA/managed futures Macro CTA/managed futures Macro
All regions North America Europe All regions North America Europe
Asia ex‐Japan Japan Latin America Asia ex‐Japan Japan Latin America

Source: Eurekahedge Source: Eurekahedge

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Multi-strategy and insurance-linked securities

The Eurekahedge Multi-Strategy Hedge Fund Index was up 3.71% in November, with most of its underlying regional mandates
posting positive returns. North American and European mandates were up 3.36% and 2.41% respectively, outperforming their
Asia ex-Japan peers who were down 1.88% throughout the month. Fund managers with exposure to equities and high yield
bonds were the primary performance driver of the strategy. In terms of year-to-date return, the multi-strategy fund managers
were up 4.51% as of November 2020, with around 30% of its constituents having generated a YTD return of over 15%.

The Eurekahedge ILS Advisers Index was flat in November, bringing its YTD return to 3.27%. ILS hedge fund managers suffered
considerable losses from the Atlantic hurricane seasons in 2018 and 2017, during which the index was down 3.92% and 5.60%
respectively. The strategy returned 0.92% throughout 2019 as loss creep from past events dragged fund managers’ performance.

Figure 11a: Multi-strategy and insurance-linked Figure 11b: Multi-strategy and insurance-linked
securities November 2020 returns securities 2020 returns
6% 18%
5% 15%
4% 12%
3% 9%
2% 6%
1% 3%
0% 0%
(1%) (3%)
(2%) (6%)
(3%) (9%)
Multi‐strategy Insurance‐linked securities Multi‐strategy Insurance‐linked securities
All regions North America Europe All regions North America Europe
Asia ex‐Japan Japan Latin America Asia ex‐Japan Japan Latin America

Source: Eurekahedge Source: Eurekahedge

Sub-strategies

Returns were mostly positive across secondary strategic mandates in November, except with FX and market neutral fund
managers who lost 0.62% and 0.24% respectively. Fund managers utilising long-bias strategy outperformed their peers with a
9.88% gain, supported by the strong performance of global equities during the month. Looking at year-to-date returns, fund
managers utilising AI and long-bias strategies led the group by returning 9.24% and 8.40% respectively over the first 11 months
of 2020.

Figure 12a: Sub-strategies November 2020 returns Figure 12b: Sub-strategies 2020 returns
12.0% 10.0%

10.0% 8.0%

8.0% 6.0%

6.0% 4.0%

4.0% 2.0%

2.0% 0.0%

0.0% (2.0%)

(2.0%) (4.0%)
Nov‐20 2020 YTD
Long‐Bias Market Neutral Trend‐Following Long‐Bias Market Neutral Trend‐Following
FX Commodity AI FX Commodity AI

Source: Eurekahedge Source: Eurekahedge

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HEDGE FUND PERFORMANCE COMMENTARY

Figure 13 provides the performance distribution of the hedge funds in the Eurekahedge database, showing the median return,
10th and 90th percentile returns, as well as the top and bottom quartile returns on a yearly basis since 2016.

Figure 13: Performance distribution of global hedge funds

30%

20%

10%
Annual Return

0%

(10%)

(20%)

(30%)
2016 2017 2018 2019 2020 YTD

Source: Eurekahedge Median Return 90th Percentile 10th Percentile

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KEY TRENDS IN EUROPEAN FUNDS

Introduction
“The European hedge
The Eurekahedge European Hedge Fund Index was down 2.31% as of October 2020 year-to-
fund industry AUM
date, outperforming the MSCI AC Europe IMI, which lost 17.41% over the same period. In
stood at US$441.2 billion the first 10 months of 2020, the European equity markets plunged across the board as
as of October 2020, the COVID-19 pandemic worsened, forcing many European governments to implement
stringent social distancing and lockdown measures which had a negative impact on
down US$29.0 billion
economic activity, resulting in the weak performance of the region’s equity market
from the end of 2019 particularly in February and March. The CAC 40 and DAX recorded 18.0% and 16.4% of
figure, attributed to losses in March alone. In terms of year-to-date, the FTSE 100 was the worst performer
among its European peers, declining 26.1% during the first 10 months of 2020 as the
both investor
negotiation around the Brexit transition also posed challenges in the UK. In the same
redemptions and vein, the CAC 40 and the DAX are down 23.2% and 12.8% over the same period.
performance-based
The European hedge fund industry assets under management (AUM) stood at US$441.2
decline.”
billion as of October 2020, down US$29.0 billion from the end of 2019 figure, attributed
to both investor redemptions and performance-based decline as a result of the risk-off
“Fixed income hedge sentiment caused by the global COVID-19 pandemic. European hedge fund managers
had recorded investor outflows of US$53.8 billion in 2019, despite the strong
funds saw the biggest
performance-based growth of US$24.1 billion due to the improving economic outlook
leap in market share, and positive development of international trade. The onset of the COVID-19 pandemic
overtaking long/short dampened investors’ confidence further, causing a staggering US$25.2 billion of net
investor outflows in Q1 2020. From April to October 2020, the European hedge fund
equities as the most
industry recorded net investor inflows of US$4.3 billion, supported by the rebound of
popular strategy within global equity markets from their March 2020 bottom. Closures in the European hedge
the European hedge fund industry outnumbered launches in 2020 by a much larger margin relative to 2019
figures. As of October 2020, the European hedge fund industry population stood at 3,523
fund industry, with a
hedge funds, down from 3,679 by the end of 2019.
market share of 26.8% in
2020, up from 6.9% in Figure 1: Industry growth in recent years

2007.”
4,500 630
4,000 560
“As of October 2020,
3,500 490
globally investing hedge

AUM (US$ billion)
Number of funds

3,000 420
funds constitute 72.4% 2,500 350
of the total industry 2,000 280
AUM, followed by hedge 1,500 210
funds focusing on 1,000 140
Europe with a market 500 70
share of 20.9%.” 0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
YTD
AUM (RHS) Number of funds
“The average Source: Eurekahedge

performance and
management fees The European hedge fund industry assets grew at an impressive rate during the period
preceding the global financial crisis in 2008. By the end of 2007, industry AUM stood at
charged by funds
US$464.3 billion following seven consecutive years of double-digit annual growth since
launching in 2020 stood the end of 2000. The performance-driven losses and investor redemptions during the
at 13.28% and 1.11% financial crisis decimated the European hedge fund industry assets, and it wasn’t until
2014 that the industry AUM recovered to levels seen before the 2008 crisis due to the
respectively – the lowest
economic slowdown inflicted by the European debt crisis which escalated in 2011.
levels since 2017.”

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KEY TRENDS IN EUROPEAN HEDGE FUNDS

Industry composition and growth trends

Asset flows

Figure 2 provides the quarterly growth of European hedge fund assets since 2013 and the breakdown into its primary drivers.
AUM reached a low of US$359.8 billion in Q2 2012 as fiscal challenges faced by a few member states threatened the European
Union, causing investors to withdraw their capital while negatively impacting fund performance. In 2013, investor interest in the
Eurozone was revived amid improving macroeconomic fundamentals and rallying markets as the region began to emerge from
the depths of the crisis, as indicated by the 10.21% annual return of the Eurekahedge European Hedge Fund Index over the year.
Apart from the minor dip in the latter half of 2014, the industry AUM generally grew steadily until the start of 2016. The year
2016 was not a good year for European hedge fund managers as reflected by the low performance growths and high investor
redemptions shown in the figure below. European hedge funds posted 0.38% return on average over 2016, falling behind their
peers from other regions, by virtue of the underlying European market’s performance which took a blow from the Brexit
referendum. By the end of 2016, the industry lost nearly US$30 billion of its assets, before starting to recover as the market
stabilised and economic prospects improved in 2017. The trend of positive net inflows had continued into Q1 2018, with US$11.3
billion of investor allocations recorded, despite the volatile market condition in February, which led to performance-based losses
of US$2.0 billion during the quarter. However, investor sentiment took a turn for the worse, owing to global trade concerns and
regional risks involving the Brexit negotiations and Italy’s debt crisis. As a result, European hedge funds suffered investor
redemptions totalling US$53.8 billion from the last three quarters of the year, as well as performance-based losses of US$11.4
billion over the same period. In 2019, despite the strong performance-based growth totalling US$24.1 billion recorded
throughout the year, driven by the improving geopolitical situation, the industry posted net investor outflows over the first three
quarters. In 2020, the European hedge fund industry got off to a bad start in Q1 2020 as news of the escalating COVID-19
pandemic rocked global financial markets, resulting in a US$55.2 billion loss in industry AUM driven by performance-based
losses of US$30.0 billion and net investor outflows of US$25.2 billion. As of October 2020, the European hedge fund industry has
managed to recover approximately 47.5% of the AUM losses incurred in Q1 2020 with performance-based gains of US$21.9
billion and net investor inflows of US$4.3 billion over the seven months since April 2020. The European hedge fund industry AUM
currently stands at US$441.2 billion, 6.2% below the Q4 2019 figure of US$470.2 billion.

Figure 2: Quarterly asset flows in European hedge fund industry

30 600

20 570

10 540
Asset flows (US$ billion)

AUM (US$ billion)
0 510

(10) 480

(20) 450

(30) 420

(40) 390

(50) 360

(60) 330
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016 2017 2018 2019 2020

Net Growth (Performance) Net Flows Change in AUM Assets at end

Source: Eurekahedge

Figure 3 illustrates the relative growth of UCITS compliant hedge funds within the European hedge fund industry. Following the
2008 market crash, the demand over higher transparency and liquidity in investment vehicles increased, which translated to the
increase in UCITS hedge fund popularity over the past decade, owing to the strict guidelines imposed on them. The AUM growth
of UCITS compliant hedge funds in Europe has vastly outpaced the growth of their non-UCITS counterparts.

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KEY TRENDS IN EUROPEAN FUNDS

Figure 3: Relative AUM growth of UCITS European hedge funds

1200%

1000%

800%

600%

400%

200%

0%

UCITS Funds Non‐UCITS Funds
Source: Eurekahedge

Head office location

The United Kingdom, as one of the biggest financial centres in the world, is the most popular location for European hedge fund
managers, with 38.4% of them basing their operation there. Switzerland and United States came in next as the bases for 13.7%
and 7.9% of European hedge funds respectively. UK and Switzerland are prime locations for hedge fund managers who are
marketing their funds toward European investors, while the US remains home to the largest amount of investors in the whole
world, explaining its popularity as a base of operation even for hedge funds that invest in regions outside the US.

Figure 4: Industry breakdown by head office location

United 
Kingdom
38.4%
Others
26.2%

Switzerland
13.7%
United 
Sweden States
3.4% 7.9%
South 
Africa
France
3.5%
7.0%

Source: Eurekahedge

Domicile

Cayman Islands, Luxembourg and Ireland are the top three locations chosen by European hedge fund managers as the domicile
of their firms. These locations collectively oversee roughly three quarters of the European hedge fund industry population
thanks to their alternative investment friendly tax and regulatory policies. The introduction of AIFMD in 2011 encouraged fund
managers that market their funds to European investors to move their firms into the European Union by making it easier for
onshore funds to obtain their AIFMD passports, boosting Luxembourg and Ireland’s prevalence among European hedge fund
managers.

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Figure 5: Industry breakdown by domicile

Cayman 
Islands
24.9%

Others
27.3%
Luxembourg
22.6%

Ireland
France 13.4%
3.4%

British Virgin 
Islands United States
3.7% 4.6%

Source: Eurekahedge

Geographic mandate

The figure below shows the geographic composition of European hedge fund industry’s AUM. As of October 2020, globally
investing hedge funds constitute 72.4% of the total industry AUM, followed by hedge funds focusing on Europe with a market
share of 20.9%. Global mandate is widely favoured by investors by virtue of the extra layer of diversification they obtain from
investing in multiple regions. While globally investing funds provide better protection in general, they will not be able to capture
as much gain as region specific funds in the event the region in question performed exceptionally well compared to other
regions. Comparing the latest numbers to their 2007 counterparts, global mandate saw a noticeable increase in their market
share, while single region mandated hedge funds seemed to fall out of favour over the past decade.

Figure 6: AUM distribution by geographic mandate

100% 2.6% 1.6% 0.4%

0.4% 5.6% 1.1% 5.7% 0.7%
90% 10.2%

21.2% 20.9%
80%

70% 28.7%

60%

50%

40%
70.5% 72.4%
30% 58.0%
20%

10%

0%
Oct‐07 Oct‐11 Oct‐20
Global Europe Emerging Markets Middle East & Africa Eastern Europe & Russia
Source: Eurekahedge

Strategic mandate

Figure 7 shows the breakdown of the European hedge fund industry AUM based on the investment strategy employed by the
fund managers. Long/short equities, considered as the traditional hedge fund strategy, oversaw 42.1% of the industry AUM by
October 2007. This number fell sharply to 21.2% as of October 2020, indicating the rise in popularity of other hedge fund
strategies over the past decade. Fixed income hedge funds saw the biggest leap in market share, overtaking long/short equities

21 THE EUREKAHEDGE REPORT DECEMBER 2020

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KEY TRENDS IN EUROPEAN FUNDS

as the most popular strategy within the European hedge fund industry, with a market share of 26.8% in 2020, up from 6.9% in
2007. These funds are typically known for lower fees and lower volatilities compared to other strategies, thus their popularity
might be explained by the increase in demand for more liquid and less volatile investment vehicles during periods of market
distress.

Figure 7: AUM distribution by strategic mandate

100%
8.9% 9.9%
90% 18.4% 2.5%
10.0%
8.9%
80% 4.1%
5.5% 12.3%
70% 14.4%
10.5%
11.7%
60%
12.5% 16.2%
50% 18.0%
6.9%
40%
26.8%
30% 14.3%

20% 42.1%

10% 24.8% 21.2%

0%
Oct‐07 Oct‐11 Oct‐20
Long Short Equities Fixed Income Multi‐Strategy Macro CTA/Managed Futures Relative Value Others
Source: Eurekahedge

Fund size

Figure 8 provides the European hedge fund population breakdown based on the amount of assets they manage. As of October
2020, 7.9% of all European hedge funds oversee more than US$1 billion worth of assets, up from the 3.3% figure back in October
2011. Contrarily, smaller hedge funds that manage US$100 million or less saw their population decline from 64.7% to 55.4% over
the same period. The increasing competition within the industry, combined with stricter regulations made it harder for small
fund managers to survive. Bigger fund managers might be able to cover their expenses from low management fees by virtue of
their large AUM, but smaller funds would have to perform well and earn their performance fees to do the same. The recently
implemented MiFID II regulation might have further tilted the balance toward bigger hedge funds since they would have better
leverage to negotiate the price of research from investment banks and brokers. On the other hand, smaller hedge funds with
tighter budget would probably have to limit their research spending or pass on the cost to their investors, at the risk of
marketing their funds at a premium compared to competitors.

Figure 8: Industry breakdown by fund size (US$ million)

100% 3.3%
6.3% 7.9%
6.7%
90% 8.4% 7.0%
10.9%
80%
15.7% 16.8%
70% 14.4%

60% 16.5% 12.9%

15.1%
50% 13.8%
15.5%
40% 21.0%
30% 19.4%
16.6%
20%
28.6%
10% 20.8% 22.2%

0%
Oct‐07 Oct‐11 Oct‐20
<= 20 20‐50 51‐100 101‐200 201‐500 501‐1000 > 1000
Source: Eurekahedge

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KEY TRENDS IN EUROPEAN HEDGE FUNDS

Launches and closures

Figure 9a below shows the annual launch and closure activities of European hedge funds since 2008. Despite the double
onslaught of the 2008 subprime mortgage crisis and the Eurozone debt crisis, the hedge fund industry population has remained
strong and resilient as the number of launches mostly managed to outpace the number of closures until the beginning of 2015,
when closure activities started to outgrow launch activities, similar to the trend we can observe in the hedge fund industry
globally. As of October 2020, the number of closures has outnumbered launches by 76.5% for the year as more European hedge
fund managers struggle to survive amid the tough economic conditions brought upon by the COVID 19 pandemic.

Figure 9a: Annual launches and closures of European hedge funds

600

500

400

300

200

100

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Source: Eurekahedge Launches Closures

Figure 9b below provides the breakdown of launch activities among European hedge funds based on their UCITS compliance. In
2020, over half of the European focused hedge funds that launched within the year were UCITS compliant.

Figure 9b: Percentage of UCITS European hedge fund launches since 2006

100%

90%

80%

70%
Launches and closures

60%

50%

40%

30%

20%

10%

0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

UCITS Non‐UCITS
Source: Eurekahedge

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The following figures show the breakdowns of launch and closure activities among European hedge funds based on head office
location, domicile, geographic and strategic mandates, as well as fund size.

Figure 10a: Launches and closures since 2008 by head office location

Launches

Closures

0% 20% 40% 60% 80% 100%

United Kingdom Switzerland United States France South Africa Sweden Others
Source: Eurekahedge

As one would expect from the most popular head office location among European hedge funds, United Kingdom saw a sizeable
number of launches and closures within the industry, accounting for roughly 40% of the launches and closures of all European
hedge funds. The next major locations in terms of launch and closure activities are Switzerland, United States and France.

Figure 10b: Launches and closures since 2008 by domicile

Launches

Closures

0% 20% 40% 60% 80% 100%

Cayman Islands Luxembourg Ireland United States British Virgin Islands France Others
Source: Eurekahedge

Figure 10b above shows that Cayman Islands saw noticeably more closures compared to the other domiciles. Over the past
decade, Luxembourg has become an increasingly popular choice for domicile of European hedge funds, thanks to the
introduction of the AIFMD.

Figure 10c: Launches and closures since 2008 by geographic mandate

Launches

Closures

0% 20% 40% 60% 80% 100%

Global Europe Emerging Markets Middle East & Africa Eastern Europe & Russia Australia/New Zealand
Source: Eurekahedge

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Globally investing funds still account for the majority of hedge fund launches in Europe, reflecting investor demand for
diversification across regions of investment. They also account for the most closures compared to the other geographic
mandates by virtue of their population size within the industry. European focused hedge funds came in second in both launch
and closure activities within the region, indicating that there are still investors that are interested exclusively in the European
economy.

Figure 10d: Launches and closures since 2008 by strategic mandate

Launches

Closures

0% 20% 40% 60% 80% 100%

Long/Short Equities CTA/Managed Futures Macro Multi‐Strategy Fixed Income Others
Source: Eurekahedge

Approximately 32% of the launches and 39% of the closures within the industry that happened since 2008 were contributed by
long/short equities hedge funds. Fixed income hedge funds came in second in terms of launches after seeing an increase in
popularity over the past few years.

Figure 10e: Launches and closures since 2008 by fund size

Launches

Closures

0% 20% 40% 60% 80% 100%

<= 20 21‐50 51‐100 101‐200 201‐500 500‐1000 > 1000
Source: Eurekahedge

Small hedge funds managing up to US$20 million in assets account for more than half of the industry launch and closure
activities. On the other end of the spectrum, it is worth noting that large hedge funds managing over US$1 billion’s worth of
assets saw noticeably more launches than closures, reflecting the strong survivability of large hedge funds within the European
hedge fund industry.

For the rest of this section, we will look at the relation between underperformance within the hedge fund industry and the
number of closures. Figure 11 compares the percentage of funds below their perpetual HWM since inception against the
percentage of funds closing every year. Within the European hedge fund industry, following the aftermath of the market crash in
2008, the percentage of funds below their HWM has mostly hovered between the 60% and 80% levels. It is worth noting that in
terms of performance fee calculation, not every hedge fund adopts the perpetual HWM system, where they only charge
performance fees for gains above their perpetual HWM. A sizeable number of these hedge funds adopt the annual HWM system,
where they reset the HWM annually.

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KEY TRENDS IN EUROPEAN FUNDS

Figure 11: Percentage of funds below HWM and number of closures

Jan‐08 Dec‐08 Nov‐09 Oct‐10 Sep‐11 Aug‐12 Jul‐13 Jun‐14 May‐15 Apr‐16 Mar‐17 Feb‐18 Jan‐19 Dec‐19 Nov‐20
450 100%

350 80%

% of funds below HWM
Number of closures

250 60%

150 40%

50 20%

(50) 0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Closures % Below HWM
Source: Eurekahedge

Table 1 below provides some key statistical data to illustrate the performance of hedge funds that closed down within the last
five years. These annualised returns are calculated over the last 12, 24 and 36 months of the lifespans of these now obsolete
funds. On average these funds lost 2.71% over the last year of their activities, but looking at the quartiles we can see that the
bottom 25% of these dead funds lost at least 7.44% of their assets in 12 months. Generally, the majority of these dead funds
generated poor to mediocre performance over the last few years before they closed down. Lastly it is important to note that
since these statistics are taken over the last few years of the funds’ lives, they capture different periods of the market, making it
difficult to compare them to the underlying market’s performance.

Table 1: Pre-closure performance statistics for funds closing in the last five years

Mean First Quartile Median Third Quartile

Last 12 months rolling return (%) (2.71%) (7.44%) (2.29%) 2.50%

Last 24 months annualised return (%) (1.47%) (4.86%) (0.92%) 2.40%

Last 36 months annualised return (%) (0.82%) (3.45%) (0.07%) 2.90%

Source: Eurekahedge

Fees

The two tables below provide the average performance and management fees charged by European hedge funds broken down
based on launch year. Table 2a provides the average fees of the entire European hedge fund industry, while Table 2b represents
the UCITS compliant hedge funds within the region. The average performance and management fees charged by funds
launching in 2020 stood at 13.28% and 1.11% respectively – the lowest levels since 2017, while the UCITS compliant average
figures stood at 13.49% and 1.09% respectively.

All these figures are noticeably lower than the traditional “2-20” fee structure (2% management fees and 20% performance fees)
commonly associated with hedge funds. Increasing competition both from within the hedge fund industry and from other
alternative investment products might have been the major contributing factor to this. By comparing the two tables, we can
observe that on average UCITS compliant hedge funds charge lower fees than the industry average figures.

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Table 2a: Average hedge fund fees by launch year Table 2b: Average UCITS hedge fund fees by launch year

Performance Fees Management Fees Performance Fees Management Fees

Year Year
(%) (%) (%) (%)
2006 17.06 1.55 2006 11.78 1.03

2007 16.70 1.51 2007 11.03 1.11

2008 15.90 1.47 2008 11.12 1.03

2009 15.72 1.46 2009 14.22 1.30

2010 16.20 1.51 2010 14.37 1.40

2011 15.83 1.43 2011 14.61 1.33

2012 15.15 1.38 2012 12.66 1.21

2013 13.62 1.23 2013 11.53 1.12

2014 14.41 1.24 2014 13.77 1.13

2015 13.52 1.16 2015 12.45 1.11

2016 13.33 1.24 2016 12.56 1.16

2017 13.04 1.08 2017 12.16 1.02

2018 13.77 1.17 2018 12.84 1.10

2019 13.50 1.18 2019 12.39 1.03

2020 13.28 1.11 2020 13.49 1.09

Source: Eurekahedge Source: Eurekahedge

The table below compares the performance and management fees charged by hedge funds based on the strategies
incorporated. Distressed debt hedge funds charge relatively high fees, while on the other hand, fixed income hedge funds
charge comparatively low performance fees and management fees.

Table 2c: Average hedge fund fees by strategic mandate

Strategy Performance Fees (%) Management Fees (%)

Arbitrage 18.02 1.26

CTA/Managed Futures 16.73 1.44

Distressed Debt 19.03 1.61

Event Driven 15.97 1.50

Fixed Income 9.52 1.03

Long Short Equities 17.09 1.45

Macro 16.09 1.43

Multi-Strategy 13.01 1.34

Others 13.54 1.37

Relative Value 16.99 1.38

Source: Eurekahedge

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Prime brokers

The hedge fund prime brokerage industry continues to be dominated by major US and European banks. As of October 2020, the
three top prime brokers based on AUM: Morgan Stanley, Goldman Sachs and Credit Suisse collectively oversee over 40% of the
total industry AUM. Over the past decade, hedge fund industry AUM has become increasingly concentrated as indicated by the
market share of prime brokers outside the top 10 tables. In 2008 the top 10 prime brokers oversee roughly 68% of the industry
AUM, while in 2020 the top 10 prime brokers dominate the market, leaving just 14% of market share for the other prime brokers.

Tables 3a-3b: Market share of prime brokers by assets under management

2008 2020

Prime Broker Market Share Prime Broker Market Share

Morgan Stanley 19.63% Morgan Stanley 14.67%

Goldman Sachs 11.86% Goldman Sachs 13.05%

JPMorgan Chase 5.91% Credit Suisse 12.55%

Lehman Brothers 5.78% Deutsche Bank 10.89%

Deutsche Bank 5.46% JPMorgan Chase 9.33%

UBS 5.11% UBS 9.31%

Newedge 4.43% Barclays 6.58%

Credit Suisse 3.65% Bank of America Merrill Lynch 3.58%

Bank of America Merrill Lynch 3.30% Citigroup 3.37%

Barclays 2.98% Newedge 2.71%

Others 31.89% Others 13.97%

Source: Eurekahedge Source: Eurekahedge

The following two figures provide the distribution of European hedge funds based on the number of prime brokers they use.
Typically, large hedge funds are more likely to use multiple prime brokers, and smaller hedge funds tend to add more prime
brokers as they grow bigger.

Figure 12: Number of prime brokers by launch year

100%

90%

80%

70%

60%

50%

40%

30%
20%

10%

0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1 2 3+
Source: Eurekahedge

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Administrators

Table 4a and Table 4b show the breakdowns of the European hedge fund administration market by assets under management.
CITCO is currently the leading player within this industry with 14.76% market share. CITCO managed to maintain its spot within
the top three since 2008. On the other hand HSBC fell to fourth place. The top administrators listed in the tables below
collectively manage between 60% to 70% of the total industry AUM, both in 2008 and 2020, indicating that the fund
administration market is not as concentrated as the prime brokerage market.

Tables 4a-4b: Market share of administrators by assets under administration

2008 2020

Administrator Market Share Administrator Market Share

HSBC 14.16% CITCO 14.76%

Citigroup 13.65% State Street 11.76%

CITCO 9.63% SS&C 9.12%

GlobeOp 6.54% HSBC 7.50%

Northern Trust 5.61% RBC 5.57%

CACEIS 5.14% Northern Trust 5.49%

JPMorgan Chase 4.45% JPMorgan Chase 5.18%

RBC Dexia 4.11% BNY Mellon 4.99%

Custom House 3.76% CACEIS 2.93%

Others 32.95% Others 32.70%

Source: Eurekahedge Source: Eurekahedge

Lifespan

The following two figures display the distribution of live and dead European hedge funds by their lifespan. The table provided
below the figures show the key statistics on the distribution. On average live funds in Europe have lasted for 9.92 years, while
dead funds survived for 5.06 years before closing down. Looking at median however, roughly half of the dead funds closed down
before four years. These lifespan figures are comparatively shorter than those seen in other regions.

Figures 13a-13b: Lifespan distribution of active and dead funds

Lifespan of active funds
100% 9%

8%
Number of funds by percentage

80% 7%
Cumulative frequency

6%
60%
5%

4%
40%
3%

20% 2%

1%

0% 0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 >28
Number of years
Source: Eurekahedge

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KEY TRENDS IN EUROPEAN FUNDS

Lifespan of dead funds
100% 18%

15%

Number of funds by percentage
80%
Cumulative frequency

12%
60%
9%
40%
6%

20%
3%

0% 0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 >28
Number of years
Source: Eurekahedge

Table 5: Lifespan statistics of European hedge funds

All Funds UCITS Funds

Lifespan of Active Lifespan of Dead Funds Lifespan of Active Lifespan of Dead Funds
Funds (year) (year) Funds (year) (year)
Mean 9.92 5.06 9.63 5.02

First Quartile 5.44 2.50 5.33 2.50

Median 9.42 4.00 9.17 4.00

Third Quartile 13.58 6.67 13.08 6.58

Source: Eurekahedge

The table above also provides the lifespan statistics of UCITS compliant hedge funds. Compared to European hedge funds in
general, these UCITS funds have shorter lifespan, albeit by a very small margin.

Performance review
This section of the report will focus on the performance of European hedge funds compared to similar asset classes (funds of
hedge funds and absolute return funds) as well as the underlying market as indicated by the MSCI Europe IMI (Local). Further, we
will dissect the European hedge fund industry based on their geographic mandates, strategic mandates, and fund size, in order
to identify the trends over the last few years.

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Figure 14: Performance of European hedge funds compared to other investment vehicles
400

350

300

250

200

150

100

50

Eurekahedge European Hedge Fund Index Eurekahedge Europe Absolute Return Fund Index
Source: Eurekahedge Eurekahedge Europe Fund of Funds Index MSCI AC Europe IMI (Local)

The Eurekahedge European Hedge Fund Index managed to generate 6.24% annualised return since December 1999, outperforming
the underlying market’s 0.09% annualised return over the same period by a substantial margin. The figure above also shows that
over a long investment horizon, European hedge funds have outperformed funds of hedge funds and absolute return funds in
the region as represented by the Eurekahedge Europe Fund of Funds Index (3.22% annualised return) and Eurekahedge Europe
Absolute Return Fund Index (3.85% annualised return) respectively.

However, looking at the medium-term performance statistics provided in the table below, European hedge funds have been
falling behind their absolute return peers over the last five years. The reason for this is that over the last five years, European
economies were in the process of recovering from the Eurozone crisis that escalated in 2011, and they have been on a rally until
recently due to the onset of the COVID 19 pandemic which decimated European equity indices in 2020. Hedge funds use various
strategies to provide downward protection for their investors in order to minimise losses during bad market conditions, but this
protection also acts as a hedge against the market at the same time, preventing hedge funds from fully capturing the gains of
the equity market. On the other hand, absolute return funds have a lot higher exposure to the market, allowing it to benefit
more from the rally, while providing less protection in case the market dips. Indeed, European hedge funds have benefited from
the downside protection in 2020, outperforming both their absolute return peers as well as the underlying market by a
substantial margin during the first ten months of 2020. Having said that, over the last three and five year periods, absolute
return funds provide the best risk adjusted performance, as represented by their Sharpe ratios in the table below.

Table 6: Performance of European hedge funds compared to other investment vehicles

Eurekahedge European Eurekahedge Europe Eurekahedge Europe MSCI Europe IMI

Hedge Fund Index Absolute Return Fund Index Fund of Funds Index (Local)
October 2020 year-to-date return (2.32%) (6.39%) (1.93%) (17.41%)

2019 return 7.39% 17.13% 8.04% 20.77%

3 year annualised return 0.11% (0.70%) (0.99%) (4.95%)

3 year annualised volatility 6.45% 11.62% 6.46% 14.62%

3 year Sharpe ratio (RFR = 2%) (0.29) (0.23) (0.46) (0.48)

5 year annualised return 1.60% 2.41% (0.67%) (0.29%)

5 year annualised volatility 5.40% 9.92% 5.51% 12.54%

5 year Sharpe ratio (RFR = 2%) (0.07) 0.04 (0.48) (0.18)

Maximum drawdown (5 years) (10.53%) (17.98%) (11.14%) (23.04%)

Source: Eurekahedge

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Figure 15 below shows the European hedge fund performance based on their investment geography. In contrast to their strong
performance in 2019, geographic mandates posted mixed performance in the first 10 months of 2020. The Eastern Europe &
Russia mandate was the worst performer, losing 19.98% during the period, in stark contrast to their 2019 performance when
they generated the strongest return among their peers. On the other hand, the emerging markets mandate topped the chart
with an average gain of 4.39% in 2020, outperforming all the other mandates by a substantial margin.

Figure 15: Performance of geographic mandates

25%

20%

15%

10%

5%

0%

(5%)

(10%)

(15%)

(20%)

(25%)
Eastern Europe & Russia Emerging Markets Europe Global Middle East & Africa

October 2020 year‐to‐date return 2019 return 3 year annualised return

Source: Eurekahedge

The table below provides the performance statistics across geographic mandates. In terms of annualised return, fund managers
focusing on emerging markets outperformed their peers over the last three and five years. In terms of risk-adjusted returns, the
fund managers focusing on emerging markets have also topped the table as represented by their three and five year Sharpe
ratios of 0.23 and 0.43 respectively. However, it is worth noting that the global mandate suffered the smallest maximum
drawdown of 5.98% over the last five years due to its more diversified nature. The benefits of diversification are also reflected in
their three and five year annualised volatility of 4.48% and 3.71% respectively which is the lowest among all mandates for both
periods.

Table 7: Performance across geographic mandates

Eastern Europe & Russia Emerging Markets Europe Global Middle East & Africa

October 2020 year-to-date return (19.98%) 4.39% (1.31%) 0.66% (0.39%)

2019 return 18.47% 15.55% 7.00% 6.43% 8.97%

3 year annualised return (5.63%) 4.09% 0.48% 1.22% 3.03%

3 year annualised volatility 15.11% 9.04% 6.17% 4.48% 6.26%

3 year Sharpe ratio (RFR = 2%) (0.50) 0.23 (0.25) (0.17) 0.16

5 year annualised return 1.68% 5.29% 1.69% 2.31% 3.72%

5 year annualised volatility 13.31% 7.60% 5.19% 3.71% 5.31%

5 year Sharpe ratio (RFR = 2%) (0.02) 0.43 (0.06) 0.08 0.32

Maximum Drawdown (5 years) (25.14%) (11.69%) (9.87%) (5.98%) (10.31%)

Source: Eurekahedge

Figure 16 provides the performance of European hedge fund managers across strategic mandates. Relative value hedge funds
outperformed their peers with their 6.48% year-to-date return as of October 2020 – followed by event driven hedge funds which
posted a return of 0.85% over the same period. The escalation of the COVID-19 pandemic globally exacerbated the risk-off

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market sentiment in 2020 as many governments were forced to implement restrictive lockdown measures in a bid to avoid
overwhelming their healthcare systems. On the other end, CTA/managed futures managers underperformed other strategic
mandates as they posted losses of 16.22% year-to-date.

Figure 16: Performance across strategic mandates

12%
8%
4%
0%
(4%)
(8%)
(12%)
(16%)
(20%)
(24%)
(28%)
Arbitrage CTA/managed Event driven Fixed income Long/short Macro Multi‐strategy Relative value
futures equities

October 2020 year‐to‐date return 2019 return 3 year annualised return

Source: Eurekahedge

CTA/managed futures funds have been performing rather poorly in the past few years, as indicated by their three and five-year
annualised returns provided in the table below. On the other hand, event driven funds have generated the best risk-adjusted
performance across all strategic mandates over both three and five year periods, supported by their robust returns. It is also
worth noting that five out of the eight strategies shown in the table have posted negative three and five year Sharpe ratios,
implying their inability to beat the 2% benchmark risk-free rate of return.

Table 8: Performance across strategic mandates

CTA/managed Event Fixed Long/short Multi- Relative

Arbitrage Macro
futures driven income equities strategy value
October 2020 year-to-date return 0.14% (16.22%) 0.85% (1.08%) (1.78%) (2.74%) (10.39%) 6.48%

2019 return 4.78% (2.67%) 10.05% 7.88% 8.06% 6.58% 8.73% 0.28%

3 year annualised return 0.87% (8.29%) 3.16% 2.23% (0.06%) 0.02% (3.41%) 2.32%

3 year annualised volatility 3.33% 16.41% 7.49% 8.36% 6.47% 5.85% 6.48% 2.40%

3 year Sharpe ratio (RFR = 2%) (0.34) (0.63) 0.16 0.03 (0.32) (0.34) (0.83) 0.13

5 year annualised return 1.80% (6.67%) 4.27% 3.70% 1.47% (0.16%) (0.43%) 2.44%

5 year annualised volatility 2.68% 12.95% 6.13% 6.65% 5.62% 4.76% 6.07% 2.15%

5 year Sharpe ratio (RFR = 2%) (0.08) (0.67) 0.37 0.26 (0.09) (0.45) (0.40) 0.20

Maximum Drawdown (5 years) (4.71%) (42.48%) (10.51%) (13.52%) (9.65%) (9.95%) (11.82%) (2.16%)
Source: Eurekahedge

Figure 17 compares the performance of European hedge funds based on the size of the assets they manage. Over the first 10
months of 2020, large hedge funds outperformed their smaller peers by generating 1.93% gains on average. In comparison,
small and medium-sized hedge funds were down 2.83% and 3.09% respectively.

33 THE EUREKAHEDGE REPORT DECEMBER 2020

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KEY TRENDS IN EUROPEAN FUNDS

Figure 17: Performance across fund sizes

10%

8%

6%

4%

2%

0%

(2%)

(4%)
Small Hedge Fund (< US$100m) Medium Hedge Fund (US$100m ‐ US$500m) Large Hedge Fund (> US$500m)

October 2020 year‐to‐date return 2019 return 3 year annualised return

Source: Eurekahedge

Table 9 shows the performance statistics based on fund sizes. In terms of annualised volatility, large hedge funds have
outperformed their smaller peers over the last three and five years, with 3.94% and 3.32% annualised volatility respectively.
Large hedge funds in the region have also recorded the highest annualised returns over the last three years and the smallest
maximum drawdown of 5.42% over the last five years.

Table 9: Performance across fund sizes

Small hedge funds Medium hedge funds Large hedge funds

(< US$100m) (US$100m - US$500m) (> US$500m)
October 2020 year-to-date return (2.83%) (3.09%) 1.93%

2019 return 8.69% 6.63% 5.70%

3 year annualised return (0.15%) (0.08%) 1.27%

3 year annualised volatility 7.77% 5.84% 3.94%

3 year Sharpe ratio (RFR = 2%) (0.28) (0.36) (0.18)

5 year annualised return 1.90% 1.12% 1.37%

5 year annualised volatility 6.51% 5.00% 3.32%

5 year Sharpe ratio (RFR = 2%) (0.02) (0.18) (0.19)

Maximum Drawdown (5 years) (12.90%) (9.36%) (5.42%)

Source: Eurekahedge

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KEY TRENDS IN EUROPEAN HEDGE FUNDS

Peer analysis
The following charts were generated with Risk Shell. Contact [email protected] to explore Risk Shell analytics and find
out how it can help you in fund risk assessment and portfolio construction.

Figure 18: Peer analysis of European hedge funds and other investment vehicles

Figure 18 compares the risk-return statistics over the last five years of the Eurekahedge European Hedge Fund Index and other
investment vehicles against the entire Eurekahedge hedge fund database. European hedge funds outperformed their fund of
funds counterpart and the underlying equity market in most of the risk-return statistics shown on the chart.

Figure 19: Peer analysis of European hedge funds across geographic mandates

Similarly, Figure 19 compares the risk-return statistics of the four major geographic mandates within the European hedge fund
industry. Emerging Markets-mandated funds generated the best risk-adjusted return as represented by their Sharpe and Sortino
ratios, supported by their robust mean returns over the last five years.

35 THE EUREKAHEDGE REPORT DECEMBER 2020

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KEY TRENDS IN EUROPEAN FUNDS

Figure 20: Peer analysis of European hedge funds across strategic mandates

Figure 20 provides the peer analysis of European hedge funds across four major strategic mandates overseeing the largest AUM
shares within the industry. Fixed income hedge funds outranked their peers in all risk-return statistics, as they yielded the best
mean returns as well as better risk-adjusted returns as seen from their superior Sharpe and Sortino ratios.

Figure 21: Peer analysis of European hedge funds across fund sizes

Figure 21 compares the risk-return statistics of European hedge funds across different asset sizes. All three classifications of
hedge funds have generated very similar risk return profiles, with large hedge funds maintaining a slight edge over their smaller
counterparts in terms of risk-adjusted returns and percentage of positive months. On the other hand, small hedge funds
generated the best mean returns but large hedge funds posted better volatilities, drawdown and time underwater compared to
their smaller competitors.

THE EUREKAHEDGE REPORT DECEMBER 2020 36

 TOP 10 TABLES

EUROPEAN HEDGE FUNDS TOP TEN TABLES

November 2020 Returns (%)* 3-Month Returns (%)

SwissRex Crypto Fund 43.20 Japan Synthetic Warrant Fund - Class USD 70.15

Seahawk Equity Long Short Fund - Class USD S 37.93 SwissRex Crypto Fund 42.45

Hilbert Digital Asset Fund 36.78 Solidum Bitcoin Momentum Strategy 32.50

Algebris Financial Equity Fund UCITS - Class B EUR 32.51 Energy Strategy 30.13
Lansdowne Princay Fund Ltd - Class B EUR Non-Restricted
28.97 Odey Absolute Return Focus Fund - Class I GBP 29.34
Voting
Leibniz Systematic Intelligence - 30 Vol 25.64 LF Odey Absolute Return Fund - Institutional 25.15

Odey Absolute Return Focus Fund - Class I GBP 24.14 Optis Global Opportunities Fund 21.83

Japan Synthetic Warrant Fund - Class USD 23.95 Algo-Capital LLC 21.61

Praesidium Global Segregated Portfolio 23.46 EQMC Europe Development Capital Fund Plc - Class A EUR 21.35

LF Odey Absolute Return Fund - Institutional 22.78 Seahawk Equity Long Short Fund - Class USD S 21.22

2020 Returns (%) 2019 Returns (%)

SwissRex Crypto Fund 290.05 GEM Global Energy Fund Ltd 212.39

Hilbert Digital Asset Fund 128.64 PharmaInvest Fund Ltd 192.56

Polar Star Spectrum Fund Ltd 110.43 Emerging Value Opportunities Fund 186.59

MVPQ Ltd 95.25 Emerging Income Fund Ltd 89.24

Solidum Crypto Quant Strategy 84.35 Quantedge Global Fund 70.46

Edale Europe Absolute Fund - Class USD 77.99 For Your Lips Only Wine Fund 54.68

Kohinoor Core Fund - Investor Class A EUR 72.56 The Lucerne Capital Fund LP 52.79

Inflection Point Investments Class B EUR 68.27 From Bordeaux With Love Wine Fund 50.32

Optis Global Opportunities Fund 66.25 Cederberg Greater China Equity Fund - Class A 49.82

Leibniz Systematic Intelligence - 30 Vol 66.13 NSF Climate Change+ Class I EUR 49.77

Annualised Returns (%)** Annualised Standard Deviation**

The Reaper Fund 69.39 NN (L) AAA ABS - I Cap EUR 0.92

For Your Lips Only Wine Fund 58.43 Candriam Index Arbitrage - Class C EUR 1.07

One Glass Is Not Enough Wine Fund 56.36 Candriam Long Short Credit - Class C EUR 1.12

Solidum Crypto Quant Strategy 48.59 Kames Absolute Return Bond Fund - Class B GBP ACC 1.47
MontLake Warrington Strategic UCITS Fund - USD Institutional
SwissRex Crypto Fund 47.83 1.48
Class Founder
From Bordeaux With Love Wine Fund 45.37 SafePort Loick Bio-Products & Bio-Energy Fund - Class EUR 1.49

Hilbert Digital Asset Fund 43.59 Allianz Credit Opportunities - Class IT13 EUR 1.60

Polar Star Spectrum Fund Ltd 43.34 Allianz Merger Arbitrage Strategy - Class I EUR 1.73

Energy Strategy 42.33 Norron Preserve 1.81

Istanbul Portfoy Second Hedge Fund 41.42 AZ Eskatos - Multistrategy ILS Fund - EUR 1.83

Sharpe Ratio** Sortino Ratio**

One Glass Is Not Enough Wine Fund 23.66 Gardena Bond Absolute Return 14.57

For Your Lips Only Wine Fund 14.12 Istanbul Portfoy Second Hedge Fund 9.52

From Bordeaux With Love Wine Fund 11.85 SEB Eureka Fixed Income Relative Value IC DKK SEED 9.17

VCM Multi-Strategy Fund 7.21 CSS Alpha Fund AIFLNP V.C.I.C. Ltd - Class A USD 7.50

SafePort Loick Bio-Products & Bio-Energy Fund - Class EUR 5.89 Pictet TR - Atlas - HI USD 6.77

CSS Alpha Fund AIFLNP V.C.I.C. Ltd - Class A USD 3.60 Istanbul Portfoy Aries Hedge Fund 5.90

Istanbul Portfoy Second Hedge Fund 2.91 Polar Star Spectrum Fund Ltd 5.42

Istanbul Portfoy Aries Hedge Fund 2.86 Elysium Global Arbitrage Fund 5.17

Gardena Bond Absolute Return 2.72 Aegir Capital Strategy 5.14

SEB Eureka Fixed Income Relative Value IC DKK SEED 2.58 Leibniz SWARM 4.94

* Based on 61.60% of funds which have reported November 2020 returns as at 14 December 2020
** For funds with a track record of at least 12 months as at end-November 2020

37 THE EUREKAHEDGE REPORT DECEMBER 2020

 TOP 10 TABLES
HEDGE FUNDS STRATEGY TOP TEN TABLES (NOVEMBER YTD)**

Arbitrage CTA/Managed Futures

Brehat I 29.07 Diversified Trend 1 96.42
Amber Hill ES Currency Arbitrage Fund SP - Class C 21.63 Solidum Crypto Quant Strategy 84.35
AQR Diversified Arbitrage Fund - Class I 16.56 AIS Futures Fund LP (3x-6x) 80.03
Dynamic Alpha Fund LP 16.14 Leibniz Systematic Intelligence - 30 Vol 66.13
Asgard Fixed Income Risk Premia 15.85 Algorithmic Multi-Strategy Program 55.42
Palisade Strategic Master Fund (Cayman) Ltd 15.60 AIS Futures Fund II LP (2x-4x) 52.57
Windmill Partners LP 13.84 Energy Strategy 46.40
The Bliss Fund LP 13.73 Algo-Capital LLC 46.14
Tenor Opportunity Fund 13.73 AG Capital 45.40
Oddo BHF Merger Arbitrage Fund - Class 3 EUR 13.49 Solidum Bitcoin Momentum Strategy 44.35

Distressed Debt Event Driven

Miltonian Capital High Yield Multi-Sector (1.12) UG Hidden Dragon Special Opportunity Fund 43.50
Waterfall Victoria Fund LP (3.81) Accendo Capital - Class A 41.26
Waterfall Victoria ERISA Fund Ltd (4.24) Clearline Capital LP 37.18
ASM Asia Recovery Fund (4.92) Helium Rising Stars Fund - Class GBP 36.14
Waterfall Eden Fund LP (6.33) Rosseau LP 19.26
Miltonian Capital Distressed & Restructuring Munis (6.39) Legion Partners Composite 18.27
Ayres Argentina Fund Ltd - Strategic Investor Class USD NI (19.49) DG Value Partners LP (Legacy Class) 15.54
Hof Hoorneman Phoenix Fund (22.66) Numen Credit Opportunities Inc 14.31
DG Value Partners LP - Class A 14.20
Mariner Glen Oaks Fund LP 11.70

Fixed Income Long/Short Equities

Gardena Bond Absolute Return 29.97 CIF Cayman Fund SPC - Chaos Alpha Fund SP 401.23
AT Total Return Fund 25.62 Core Dragon Fund 260.09
Terebinth SNN FI Macro Retail Hedge Fund 25.08 AlphaNorth Partners Fund - Class A 124.97
Istanbul Portfoy Aries Hedge Fund 24.18 New Thinking Fund SPC - New Thinking Global Fund SP 95.90
RWC Global Convertibles Fund - Class B EUR 17.63 LSQ Fund 95.74
The Asgard Fixed Income Fund I (EUR) 15.72 Frazis Fund One Ltd 92.10
CSS Alpha Fund AIFLNP V.C.I.C. Ltd - Class A USD 11.90 Tantallon Fund 80.16
RWC Asia Convertibles Fund - Class B EUR 11.87 Mach Innovation Fund LP 78.32
Pier Special Opportunities Fund LP 11.23 Edale Europe Absolute Fund - Class USD 77.99
New Capital Wealthy Nations Bond Fund - EUR Ord Inc 10.74 Rock Hill Dragon Fund 77.99

Long-Only Absolute Return Macro

HSZ China Fund (HCF) - USD 47.81 Kohinoor Core Fund - Investor Class A EUR 72.56
BYTZ Fund LP 47.32 HonTe LH Macro Onshore Fund LP 64.51
New Capital China Equity Fund - USD Ord Acc 45.93 Entropy Global Macro Fund - Class A 43.45
China Southern Dragon Dynamic Fund - China New Balance Opportunity Fund
42.99 Gemsstock Fund 41.84
Class I USD
Imara Zimbabwe Fund - Segregated Portfolio 42.17 East Sea Opportunities Fund - Class A 36.15
Vitruvius Growth Opportunities Class BI EUR 41.74 Twotail Alpha Onshore Fund LP 35.38
FountainCap Global China Opportunity Strategy 39.35 Kohinoor Series Three Fund - Class B USD 23.83
RoboCap UCITS Fund - USD Institutional Class Founder 38.39 Acrometric Fund SP - Class A 23.46
Vitruvius Greater China Equity Class B USD 37.70 The 36 South Cullinan Fund - Class A EUR 17.99
Cephei QFII China Total Return Fund 36.32 NEXT-alpha 17.87

Multi-Strategy Relative Value

Polar Star Spectrum Fund Ltd 110.43 Polar Star SNN Qualified Investor Hedge Fund 59.06
L1 Capital Global Opportunities Fund 56.02 ABR Dynamic Blend Equity & Volatility Fund - Institutional 45.17
VCM Multi-Strategy Fund 49.62 Switchback Dynamic Volatility Fund 1 LP 42.38
Aleutian Fund 39.50 AM Capital Opportunity Fund I LLC 35.59
Factorial Feeder Fund I 35.33 Amundi Funds Volatility World - I USD (C) 24.42
Fontainebleau Capital Partners LP 32.45 Amundi Funds Volatility Euro - I EUR (C) 20.36
Nineteen77 Global Multi-Strategy Alpha Ltd 29.80 Twin Tree Capital Partners LP 17.96
IXI Alternative Investment Fund V.C.I.C. PLC 29.58 Aristeia International Ltd - Class A 17.54
New Capital Strategic Portfolio UCITS Fund - USD Inst Acc 29.06 Serenitas Credit Gamma Master Fund LP 15.08
Libertas Real Asset Opportunities Fund - Class A 28.51 BlackBox Master Fund LP 13.83

Others
SwissRex Crypto Fund 290.05
Genesis Block Fund Ltd 215.92
Apollo Capital Crypto Fund 203.04
Silver 8 Partners LP 136.97
Hilbert Digital Asset Fund 128.64
Rivemont Crypto Fund - Class F 113.71
Blockforce Multi-Strategy Fund 100.27
MVPQ Ltd 95.25
ProChain Capital 78.27
Cohalo Dynamic Volatility Strategies (DVS) SMA 47.28

* Based on 54.70% of funds which have reported November 2020 returns as at 14 December 2020
** For funds with a track record of at least 12 months as at end-November 2020

THE EUREKAHEDGE REPORT DECEMBER 2020 38

 TOP 10 TABLES

ISLAMIC FUNDS TOP TEN TABLES

November 2020 Returns (%)* 3-Month Returns (%)

Iman Fund - Class B 12.82 Taurus Ethical Fund B 11.73

TRIM Syariah Saham 12.11 Amana Developing World Fund Institutional Shares 10.07

Amana Growth Fund Investor 11.12 Emirates MENA Opportunities Fund - Class A USD 9.38

Amana Income Fund Investor 10.52 FALCOM Saudi Equity Fund 9.08

TRIM Syariah Berimbang 10.48 TRIM Syariah Saham 8.10

FALCOM Saudi Equity Fund 10.19 Tharwa Islamic Fund 8.06

Amana Developing World Fund Institutional Shares 8.78 TRIM Syariah Berimbang 7.95

Principal Islamic Small Cap Opportunities Fund 8.61 Principal Islamic Small Cap Opportunities Fund 7.90

InterPac Dana Safi 8.22 NBAD Islamic MENA Growth Fund 7.77

Element Islamic Equity Sanlam Collective Investments Fund 7.88 InterPac Dana Safi 7.65

2020 Returns (%) 2019 Returns (%)

InterPac Dana Safi 78.06 Qinvest Spyglass US Growth Fund 37.52

BIMB i-Growth 55.75 Iman Fund - Class B 34.68

Public Islamic Opportunities Fund 53.58 DWS Noor Precious Metal Securities Fund - Class A 34.26

Public Islamic Select Treasures Fund 32.85 Amana Growth Fund Investor 33.05

Public Islamic Asia Tactical Allocation Fund (PIATAF) 31.94 SC US Equities Passive Fund - Class S 32.91

PB Islamic Asia Strategic Sector Fund 30.19 SC European Equities Passive Fund - Class S 30.83

Public China Ittikal Fund 26.69 FALCOM Saudi Equity Fund 29.46

Amana Growth Fund Investor 25.57 SC Global Sustainable Equities Fund - Class S 29.25

Public Asia Ittikal Fund 25.25 Hong Leong Dana Makmur 29.17

Public Islamic Asia Dividend Fund 25.10 Principal Islamic Small Cap Opportunities Fund 29.00

Annualised Returns (%)** Annualised Standard Deviation**

Taurus Ethical Fund B 17.04 Principal Islamic Deposit Fund 0.13

Emirates Islamic Money Market Fund Limited Institutional
Public Islamic Opportunities Fund 12.95 0.24
Share Class I USD
Meezan Tahaffuz Pension Fund - Equity Sub Fund 12.26 Principal Islamic Money Market Fund 0.25

Amana Growth Fund Investor 11.31 FALCOM SAR Murabaha Fund 0.26

WSF Global Equity Fund - USD I 10.37 Public Islamic Money Market Fund 0.82

Public Islamic Select Enterprises Fund 9.36 PB Islamic Cash Management Fund 0.83

Insight I-Hajj Syariah Fund 8.79 Meezan Tahaffuz Pension Fund - Money Market Sub Fund 0.89

Public Islamic Equity Fund 8.72 Meezan Tahaffuz Pension Fund - Debt Sub Fund 1.32

InterPac Dana Safi 8.46 Public Islamic Select Bond Fund 1.68

Public Islamic Dividend Fund 8.35 Insight I-Hajj Syariah Fund 1.96

Sharpe Ratio** Sortino Ratio**

Meezan Tahaffuz Pension Fund - Money Market Sub Fund 8.30 Meezan Tahaffuz Pension Fund - Debt Sub Fund 27.55

FALCOM SAR Murabaha Fund 7.18 Insight I-Hajj Syariah Fund 8.05

Meezan Tahaffuz Pension Fund - Debt Sub Fund 5.82 Principal Islamic Money Market Fund 5.08
Emirates Islamic Money Market Fund Limited Institutional Share
5.67 PB Islamic Bond Fund 3.67
Class I USD
Insight I-Hajj Syariah Fund 4.48 Public Islamic Bond Fund 3.23

Public Islamic Money Market Fund 3.29 Public Islamic Select Bond Fund 3.14

PB Islamic Cash Management Fund 3.12 Public Islamic Income Fund 2.79

Principal Islamic Money Market Fund 2.45 Public Islamic Enhanced Bond Fund 2.09

Public Islamic Select Bond Fund 2.34 Taurus Ethical Fund B 1.97

PB Islamic Bond Fund 2.23 Public Islamic Select Enterprises Fund 1.74

* Based on 37.62% of funds which have reported November 2020 returns as at 14 December 2020
** For funds with a track record of at least 12 months as at end-November 2020

39 THE EUREKAHEDGE REPORT DECEMBER 2020

 EUREKAHEDGE REGION/STRATEGY INDEX RETURN MATRIX

Insurance-linked
Arbitrage CTA/managed futures Distressed debt Event driven Fixed income Long/short equities Macro Multi-strategy Relative value All strategies
securities

November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD November 2020 YTD
2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns 2020 Returns

Asia 4.49 3.10 (2.42) (0.82) 0.41 8.73 2.95 2.66 2.02 5.24 5.95 16.69 0.16 7.72 (0.12) 7.83 4.80 13.76

Asia ex Japan (2.42) 6.21 (3.48) (2.05) 2.65 (0.21) 1.68 7.16 6.83 23.26 0.16 4.96 (1.88) 6.60 5.41 18.94

Asia inc Japan (2.42) (0.82) 0.41 8.73 0.77 (0.08) 2.02 5.24 6.92 22.26 0.16 7.72 (0.91) 6.18 5.38 17.30

Australia / New Zealand 0.66 7.74 7.29 10.08 (0.12) 10.61 5.97 9.96

Emerging markets (2.42) (11.16) (3.48) (8.45) 2.65 (1.16) 2.92 3.34 7.02 18.62 1.44 5.93 4.37 3.46 5.70 12.47

Europe 1.68 1.28 (5.42) (20.76) 0.85 1.71 3.00 1.85 5.29 3.43 1.87 (0.59) 2.41 (8.24) 1.49 8.42 4.27 1.85

Greater China 1.31 7.21 6.62 34.21 (3.64) 12.32 5.38 30.69

India 7.83 14.38 7.83 14.79

Japan 5.12 4.03 1.46 (4.48) 2.26 16.98 2.21 (2.13)

Korea

North America 2.86 6.74 2.12 6.05 2.80 7.58 10.10 10.78 2.55 2.04 8.75 15.59 9.76 22.53 3.36 3.17 10.66 14.51 6.46 11.13

Latin America 8.28 (2.37) 5.06 5.57 7.08 2.70

Latin America (Offshore) 5.08 (8.85) 7.66 (0.41) 5.94 (4.91)

Latin America (Onshore) 9.70 0.52 4.48 6.98 7.42 5.22

All Regions 2.33 8.82 1.95 3.95 1.40 0.13 6.06 3.44 2.53 3.42 6.88 12.47 2.29 6.17 3.71 4.51 5.90 8.69 (0.04) 3.27 4.50 8.09

* Based on 42.60% of funds which have reported November 2020 returns as at 10 December 2020

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THE EUREKAHEDGE REPORT DECEMBER 2020