Hedge Funds Post Third Successive Month Of Gains In May by Preqin

Industry marks longest period of positive performance since May 2015, with all leading strategies making gains in 2016 YTD

Hedge funds marked another positive performance month in May, with the industry returning 0.93% through the month to bring year-to-date gains to 1.55%. Although this does not match the 2.39% and 1.42% returns seen in March and April, almost all leading strategies saw positive returns; and for the first time this year, all leading strategies are now marking positive year-to-date performance. Event driven strategies saw the strongest performance through the month, returning 1.59% to take 2016 YTD returns to 3.01% – the highest of any leading strategy – while equity strategies also posted robust gains of 1.18% for the month. Macro strategies were the only leading strategy to record losses in May, returning -0.11%.

Following three months in which they produced the highest returns of any size classification*, emerging hedge funds saw the lowest returns of any size in May, with gains of 0.65%. By contrast, large hedge funds had their highest performance month of 2016, making gains of 1.19%. However, this does not reverse the overall trend seen in the preceding months, and emerging hedge funds still have the highest YTD returns (+1.80%), while large hedge funds are the only size classification still facing losses, with returns of -0.16% for the year so far.

Hedge Funds

Hedge Funds – Other  Performance Facts:

  • Discretionary Funds Win Out: Discretionary funds posted gains of 1.29% in May, outperforming systematic funds (+0.53%) for a third consecutive month. Both trading styles are seeing gains through 2016 YTD, with discretionary funds returning 1.17% and systematic performance at 1.02%.
  • Liquid Alts Neutral: Alternative mutual funds saw a month of near-neutral returns, posting 0.08% through May and 0.58% so far this year. UCITS also saw small gains of 0.21%, with the fund type still returning negative performance of -1.35% for 2016 YTD.
  • CTAs Suffer Losses: The fluctuating performance of CTAs took a downward turn in May, suffering losses of 0.98%. Although 2016 YTD shows gains of 0.68%, CTAs have only recorded two consecutive months of positive returns once since the start of 2015.
  • North America Ahead: Hedge funds focused on North America saw the largest gains in May, returning 1.38%, with the region also seeing the best performance through 2016 YTD (+2.40%). Although they recorded positive performance for the month, Asia-Pacific- and Europe-focused funds are still showing losses of 0.81% and 1.68% respectively for the year so far.

Comment:

“The hedge fund industry saw further gains in May, with positive returns across all leading strategies and for the industry as a whole. Most trading methodologies and strategies are showing gains in 2016 YTD, despite negative performance at the start of the year, and hedge funds can look forward to the coming months with optimism.

Although macro-events such as the Brexit referendum and US election are making for choppy global markets, the industry has begun to show again its ability to provide non-correlated, risk-adjusted returns in challenging financial conditions. Continued positive performance to the end of H1 should restore some investor confidence in the industry, and fund managers will be hopeful of increasing inflows over the remainder of 2016.”

Amy Bensted – Head of Hedge Fund Products, Preqin