Overview: FX strategies
HFN active and inactive databases contains over 200 unique Fund products with a primary investment strategy which focused on foreign exchange markets. Commercial database contains 96 products, of whom 68% are unique with 6 unique products structured as UCITS. This report creates the HFN HFN FX Index to compare these funds.
• The HFN FX Index was + 2.37% in April and + 1.76% of the current year 2011. This compares to + 3.07% YTD for equity hedge fund strategies, + 3.59% for fixed income strategies and + 2.78% for the broad hedge fund industry.
• HFN estimates total hedge fund assets invested in FX strategies was 51.6 billion dollars at the end of the first quarter of 2011.
• April performance from FX strategies was best for more than five years, but early indications for can view group lost most, if not all April's profits.
Performance from FX strategies in April and may enter the aggregated positions from the Group were negative on the US dollar. Of the relationship between monthly FX strategies into one United States dollar vs. basket of currencies index over the past two years was-0.62. There are, however, in the FX universe a diversity of strategies that enable an aggregation of return flows a comprehensive picture of individual success and failure. The rest of the report breaks down FX Strategy ratings to give a better perspective on the returns generated by this sector hedge fund industry.
FX Fund properties
The aggregated qualitative details of FX strategies in HFN database gives an indication of the collective characteristics of FX strategies for the entire industry:
• London is the most common city where FX strategies base its operations; but the majority of FX funds exist in the United States with New York and Chicago's leading locations for Boston.
• The average FX entity has 228.5 million dollars in assets strategy, compared with the average equity strategy 196.5 million dollars and fixed average income strategy size of 443.5 million dollars.
• The majority of the current crop of FX and credit resources was initiated in 2008 while equity fund launches reached the end of 2006 and 2007.
• London and the rest of Europe has a higher concentration of quantitative based FX strategies in the United States, Boston and Chicago have more discretionary based strategies than New York.
Total asset levels and flows estimates
HFN has historically not broken out total asset levels and flows of funds investing primarily in FX strategies. For this report, estimates have been made from FX Fund in HFNS major asset flow test.
• HFN estimates total assets invested in FX strategies at the end of the first quarter of 2011 was 51.6 billion dollars. Total AUM has changed much over the last nine months (since the previous report).
• Performance has increased AUM an estimated $ 580 mm while net investor flows have been negative.
• Investor's represented a net outflow of over $ 700 mm from FX strategies over the last nine months until the first quarter of 2011. Broad hedge fund industry had a net inflow of 110 billion dollars in the same timeframe.
• Early estimates for April indicated meaninful inflow, but performance can lead to a further redemption.
Investors flow data end of 2010, indicated increased interest in FX strategies, but redemption 2011 has so far indicated investors have not been satisfied with the performance. Var asset weighted return for FX strategies + 1.13% in the nine months ending Q1 2011 compared with + 10.20% for the broad hedge fund industry in the same time frame.
Performance by product size and strategy Figure 5 shows the annualized returns for the past 24 months, ranked by percentile for FX strategies compared to several other primary market hedge fund ratings. Asset groups are defined by the Fund $ AUM at period early period to best quantify returns of actual fund size. Figure 6 shows the rolling yields for quantitative vs. discretionary funds.
Of the strategy assets varies a bit. FX devices seem to have a higher concentration of managed accounts, and so actual fund size may not be the best indication of the size of a FX operation.
• Smaller FX funds had a slightly higher median income than larger funds, but larger funds (> $ 100 mm) were meaningfully higher top percentile returns.
• Large FX strategies (or "assets in the strategy ') performed relatively well over the last twelve months (LTM) and current year 2011.
• The FX units, through the strategy AUM, with more than 1 billion dollars, an average of + until 4.45% in LTM and + 5.47.% in 2011. both of the broad hedge fund industry aggregated returns.
• Based on the sectors means that use FX strategies, primary or secondary, it appears that FX Strategy exposure in General has been a drag on performance.
• In recent terms, do not have a meaningful difference between quantitative and discretionary FX strategies, but in the longer term, resources that make it possible for a discretionary power has done better.
Forward
HFN has done studies on investor flow trends and the lining investors chase returns. The Data also show the tendency to get rewarded for chasing yield and rewarded for use from the resources crisis management, at least in the years since the financial crisis. For FX strategies shows the first part of the trend to hold true.
Medium reporting full access streams to HFN who had negative returns 2010 had an average of 19 million dollars cashed in the past nine months and on average 4 million dollars for the year 2011. Those who performed the hedge fund industry 2010 had average net inflows of $ 26.1 million in the last nine months and 10 million dollars for the year 2011. Investors seemed to take a decent decision and. The Group at the bottom is-0.12% in 2011, while the top group is + 3.73%
What this means for FX strategies as a whole, but are not necessarily positive. Given the relatively poor aggregated performance 2011 (only one third of FX funds have performed industry 2011 through April, a figure that is likely to be reduced in May) strategy is likely to reduce in size with money flowing to a select group.
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