Hedge Funds Returns Mixed as Major Trends Shifted in April

Hedge Funds Returns Mixed as Major Trends Shifted in April

The hedge fund industry produced an aggregate return of +1.22% in April, lifting YTD returns to +2.92%, compared to the S&P 500 which increased +0.96% in April and is +1.93% YTD, according to a new report from eVestment.

Managed futures (MF) funds posted their first monthly loss since October 2014, falling -0.67% and ending a five-month string of gains which saw the universe produce cumulative returns of nearly six percent. The declines came as the dominant trends of declining oil prices and USD strength both shifted in April.

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Managed futures hedge funds post large declines in April

Large managed futures strategies, which were virtually the sole beneficiaries of investor interest returning to the segment in Q1 2015, posted some large declines in April. Returns from funds with >$1 billion in AUM were -3.62% during the month. This ends a string of eight consecutive months of gains during which large managed futures funds returned an average of +17.89%.

Global macro funds also appeared caught by the currency and commodity trend shifts in April and declined -0.65% during the month. However, unlike their managed futures peers, large macro funds performed relatively well in April, returning an average of +2.15%, which puts the >$1 billion group +3.50% YTD and places them among the best performing segments of the industry this year.

Hedge Funds

Credit strategies up +2.25% in April

Credit strategies produced strong performance in April, +2.25%, by far their best month since February 2014. Performance had been mixed, but mostly negative for the group since July 2014. Recently, returns have appeared highly influenced by exposure to European credits. A rebound in Euro corporate indices in April coinciding with credit funds’ strong month confirms the relationship. Funds focused on securitized credit markets also produced positive returns in April, +1.26%.

Long/short equity strategies outperformed the S&P 500 in April, despite some elevated losses from larger funds. Performance in April again appears influenced by exposure to European equities. US-focused long/short equity funds slightly underperformed the S&P, returning +0.65% in April, but have produced returns inline with the index in 2015, +1.92% vs. +1.93%, respectively.

Hedge Funds

Event driven strategies were positive in April, returning +1.35%, bringing YTD 2015 returns to +2.33%. Distressed funds produced returns of +0.72%, their third consecutive monthly increase. This is a welcome positive streak for distressed investors after enduring a seven month drawdown ending January 2015 which produced average declines of -6.83%.

Emerging market funds posted very good returns in April as markets in Brazil and Russia rebounded, while Chinese equities accelerated their positive run. EM hedge funds returned +6.28% during the month, their best month since March 2013.

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