Returns of India-focused hedge funds see erosion

They may have been one of the heroes of the global hedge fund industry in 2014, but India-focused hedge funds are losing momentum.

The Indian hedge fund industry delivered 38.95 per cent return in 2014, but in the last quarter of the year, that growth rate was just 5.93 per cent. The 20 India-focused funds posted 2.49 per cent gains in October, 3.10 per cent in November and a sobering 0.25 per cent in December.

Changed fortunes Still, that’s a marked improvement over their 13.57 per cent loss in 2013 and in the previous years too.

The 390 Asian funds tracked by Eurekahedge faced similar headwinds going into 2015, with their growth rate slowing to 3.66 per cent in the final quarter of 2014, compared with 6.69 per cent for the whole year. Latin American hedge funds saw an even sharper reversal, with their returns for the three-month period turning negative, at -0.52 per cent, pulling down their overall return for the 2014 calendar year to 1.67 per cent.

Delving into country-specific fund performance, it emerges that Japanese funds experienced a similar slowdown in the December quarter. Their returns fell to 3.67 per cent in the period, compared with an average monthly return of 5.24 per cent for the whole of 2014. That’s quite a dip from their 27.81 per cent gains reported for 2013.

A similar trend played out for China-focused funds, whose October-December returns slowed to 4.80 per cent, dragging down the 2014 performance of the 87 funds tracked by Eurekahedge to a 7.81 per cent gain. Korean funds had a particularly bad quarter, sliding into negative returns with a 0.14 per cent dip in the fourth quarter, even though they delivered a reasonable 5.57 per cent for the year.

Some bright spots In contrast, the 666 North American funds tracked by Eurekahedge accelerated in the same period, rising by 5.86 per cent in the October-December quarter, compared with 5.69 per cent growth for the year as a whole. European funds witnessed an even bigger improvement in the quarter, gaining 3.12 per cent, even though their full-year return for these 316 funds was a disappointing 0.68 per cent.

Overall, performance of global hedge funds was a mixed bag in 2014.

According to the latest Eurekahedge data, the Mizuho-Eurekahedge Index, an asset weighted index of 1,620 constituent funds that is designed to represent a capital weighted benchmark for the global industry, delivered an annual return of 1.16 per cent in 2014.

The largest funds, in particular, as represented by the collaborative TOP100 and TOP300 Index of Mizuho and Eurekahedge, representing 95 and 283 of the largest funds by asset size, respectively, had muted results to show investors in the calendar year gone by. The TOP100 delivered a 2.24 per cent annual return, while the TOP300 Index could only muster a 1.71 per cent gain.

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