Offering a unique combination of hedge fund like returns in a liquid and regulated form, Alternative UCITS funds continued to increase their popularity with investors in 2017. Total Assets under Management for the industry grew 16 per cent EUR450 billion.
That’s according to the latest Market Overview from LuxHedge which reveals that asset growth was nicely distributed across the different strategies with Equity Hedge Funds attracting 14 per cent and Fixed Income Relative Value funds gaining 17 per cent in assets. The largest asset growth was realised by Global Macro and CTA funds which both advanced 25 per cent in 2017. 2017 also saw a record of 248 new fund launches, just falling short of one new fund launch every business day. Some 178 Alternative UCITS funds were liquidated during 2017, bringing the total number of funds to 1429 at the year end.
In line with the broader Hedge Fund market, performance for Alternative UCITS funds was solid in 2017 with close to 80 per cent of funds in our database posting positive returns. The LuxHedge Global Alternative UCITS Index, representing more than 1000 funds that have assets over EUR20 million and a minimum track of six months, advanced with 2.27 per cent for the year. All broad strategy groups realised gains in 2017.
On the back of rising equity markets, performance was led by Equity Hedge strategies which generally kept a long bias to equity markets. Especially Asia proved to be the most fertile ground to find equity long/short trading opportunities with the LuxHedge Long/Short Asia incl. Japan UCITS index advancing 25.6 per cent in 2017. In this bullish equity market environment, two out of three Equity Market Neutral funds posted a positive return and the LuxHedge Equity Market Neutral UCITS index gained 2.31 per cent for the year.
Within Fixed Income Arbitrage, most funds took more conservative approaches and realised volatilities of around 1 per cent to 1.5 per cent during 2017. Annual performance came in positive for four out of five funds, the LuxHedge Fixed Income Relative Value UCITS Index gained 1.65 per cent in 2017.
With bonds and currencies at the mercy of central banks, many Global Macro funds struggled to add value during 2017. Performance was wide spread with the worst funds returning -20 per cent and the best funds returning close to 30 per cent. Tracking the average fund, the LuxHedge Global Macro UCITS Index realised a modest gain of 1.16 per cent in 2017.
Also CTA funds did not have a trivial 2017. Low volatility and trend reversals hurt performance in the first half of the year, but most funds could make this up in the second half. Performance came in just positive for 2017: LuxHedge CTA & Managed Futures Index 0.26 per cent.