In the current market environment, many European investors are increasingly looking for alternative sources of returns. 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 with +16%, now well exceeding 450BEUR.

Asset growth was nicely distributed across the different strategies with Equity Hedge Funds attracting +14% and Fixed Income Relative Value funds gaining +17% in assets. The largest asset growth was realized by Global Macro and CTA funds which both advanced +25% in 2017.

2017 also saw a record of 248 new fund launches, just falling short of 1 new fund launch every business day. 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% of funds in our database posting positive returns. The LuxHedge Global Alternative UCITS Index, representing more than 1000 funds that have assets over 20MEUR and a minimum track of 6 months, advanced with +2.27% for the year. All broad strategy groups realized 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% in 2017. In this bullish equity market environment, 2 out of 3 Equity Market Neutral funds posted a positive return and the LuxHedge Equity Market Neutral UCITS index gained +2.31% for the year.

Within Fixed Income Arbitrage, most funds took more conservative approaches and realized volatilities of around 1% to 1.5% during 2017. Annual performance came in positive for 4 out of 5 funds, the LuxHedge Fixed Income Relative Value UCITS  Index gained +1.65% 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% and the best funds returning close to +30%. Tracking the average fund, the LuxHedge Global Macro UCITS Index realized a modest gain of +1.16% 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 2^nd half. Performance came in just positive for 2017: LuxHedge CTA & Managed Futures Index +0.26%.

For further details, please refer to All LuxHedge Market overviews