There is a noticeable ratio differential occurring on the HSBC Hedge Weekly performance list. Hedge funds on the losing end of the scale are more pronounced on a year over year basis, with the Worst drawdown fat left tail nearly 20% larger. With hedge funds reporting the best performance since January, according to data from Hedge Fund Research, what’s going on?
Worst Drawdown by category - Energy funds are 1 & 2 losers in 2017 year to date after 1 & 2 winners in 2016
The top five hedge funds in the HSBC performance rankings are down, on average, -32.19% on the year, which is near a 6.44% negative differential year over year. The differential comes as the HFRI fund weighted composite index is up 4.81% year to date and higher by 1.18% in July.
The biggest loser year to date is Alphagen Elnath Fund Ltd., down 45.62% on the year. Volatility might be the watchword with this $49 million energy trader. Last year the fund, with a jaw dropping 48.75% standard deviation of returns, was the HSBC yearly winner, delivering 78.17% to investors at the end of 2016.
The energy sector has been beset by large hedge fund troubles, with Andy Hall closing his Astenbeck Master Commodities Fund II recently, previously citing “fake news” as a component of a troubling market environment.
The second biggest loser on the HSBC list has much in common with Mark Gordon’s Alphagen Elnath Fund. Donald Textor, who operates the $104 million Dorset Energy Fund, are down -40.77% year to date. Both Alphagen and Dorset trade energies, globally and in the US respectively, and they were first and second to end the 2016 performance derby. Dorset, for its part, delivered 65.5% positive returns for investors and does so with average annual returns volatility of 26.19%.
By contrast, the HFRI Energy / Basic Materials hedge fund index is down -6.61% year to date.
Worst Drawdown ever? Systematic and commodity funds having difficulty 2017
Paul Brewer’s diversified macro strategy running the $568 million Rubicon Global Fund is making a rare appearance on the bottom 20 list, coming in at the third worst performance on the HSBC list year to date, down -29.84%. The last loosing year for the fund, with 15.97% volatility was 2012, when it was down a mild -3.89%. At present, the fund is challenging its worst drawdown record of -36.03%, with started in December 2004 and ended May 2007, just before the start of the 2008 financial crisis. The HSBC global macro diversified strategy category is generally having difficulty in 2017, down -1.47% collectively.
The fourth worst strategy of 2017 is the $144 million Long / Short Elm Ridge Capital Partners, down -22.83%. With volatility of 14.38%, the fund was also the third worst performer in 2015, down -29.96%. This past May, however, the fund came out of its worst drawdown of -37.48%, a string of losses that started in August of 2014. The fund was up 1.10% on the month.
Like most of the funds in the top five worst category, the $124 million Conquest Macro Fund is no stranger to volatility. Marc Malek’s systematic / global fund, with 20.04% volatility, is currently down -21.91% on the year, also in its worst drawdown of -57.52%, which started in July 2009.
The HSBC systematic global strategy is down -2.39% year to date. Other systematic strategies gracing the worst 20 performers include the $1.1 billion Alphaquest Original Program, down -16.70% year to date; the $51 million Altis Global Trend Portfolio, down -15.47% year to date; the $2.1 billion GSA Trend Fund, down -10.10%; and the $1.6 billion Lynx (Bermuda) LTD program, down -9.94%. The HFRI Macro Systematic Diversified Index, meanwhile, is down -1.39% year to date.
Quantitatively related and commodity funds are dominating the bottom 20 list as the beta market environment for price persistence has been lacking in many key markets thus far in 2017. Notable losers include the Tulip Trend Fund, down -19.62%; Andurand Commodities Fund, down -17.08%; Eagle Quantitative Macro, down -15.11%; and The Merchant Commodity Fund, down 12.49%.