Hedge funds posted a 3.24% gain during the third quarter despite negative performance in August, according to research firm Preqin. The alternative asset research firm said that hedge funds’ performances in July and September were among the three best months this year. Hedge funds have gained 7.17%. That’s good news after a flat return in the second quarter. Hedge funds’ performance this year so far is in line with the previous year. Last year, hedge funds gained 7.37% through September, compared to 7.17% this year. So, Preqin estimates this year’s returns to be similar to 2012.
Single manager funds returned 3.24%, while UCITS hedge funds were up 3.10%. The funds of hedge funds gained 1.53% for the quarter ending September 30, but CTAs and managed futures funds continue to struggle. They are down 1.63% for Q3 and -2.46% this year so far. Overall, the hedge fund benchmark gained 1.63% in July, slipped 0.14% in August and rose 1.72% in September.
Khrom Capital was up 32.5% gross and 24.5% net for the first quarter, outperforming the Russell 2000's 21.2% gain and the S&P 500's 6.2% increase. The fund has an annualized return of 21.6% gross and 16.5% net since inception. The total gross return since inception is 1,194%. Q1 2021 hedge fund letters, conferences and more Read More
Long/short hedge funds lead the pack
Event-driven strategies have consistently outperformed other strategies, gaining 4.01% in Q3. The long/short strategy funds returned 4.42% compared to 2.41% in Q2. Asia-Pacific focused funds returned 3.36% in Q3, taking the total returns for this year to an impressive 12.68%. Europe and North America focused funds also performed well. Each of them posted positive returns for the fifth consecutive quarter.
However, hedge funds’ returns continue to lag behind equity markets. While hedge funds have returned 9.98% over the past 12 months, the S&P 500 Index rose 16.72% in the same period.
Investors more confident of hedge funds now
Preqin also found that investor sentiment about hedge funds has improved over the past 12 months. But performance is the most important thing institutional investors look for. If fourth quarter returns come in line with Q3 gains, that will boost investors’ confidence and satisfaction with the performance of hedge funds.
Long/short equity strategies are the most sought after among institutional investors, followed by diversified funds and macro funds. Solid performance of event-driven funds in recent quarters has attracted some investors, and 22% of all searches initiated in Q3 were for event-driven funds.