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Hedge Funds Post Lowest Annual Returns Since 2011

Hedge Funds Post Lowest Annual Returns Since 2011 by Preqin

2015 performance sinks to 2.02% as hedge funds post December losses of 0.40%

December was another difficult month for the hedge fund industry, as the Preqin All-Strategies Hedge Fund benchmark recorded performance of -0.40%. This puts full-year performance for 2015 at 2.02%, the lowest yearly return since 2011, when hedge funds posted -1.77%. December’s losses mean that hedge funds have posted negative returns in five months of the year, while only three months saw them gain more than 1.00%. All top level hedge fund strategies experienced losses in the final month of 2015, with equity strategies posting a negative return of -0.64%, and credit strategies returning -0.55%. For the year as a whole, the majority of strategies posted positive returns, but event driven strategies recorded losses of 0.07% while relative value strategies gained 5.03%.

CTAs have experienced a particularly turbulent year, and have finished 2015 with a loss of 0.49%, compared to their 10.86% gain in 2014. Having posted negative returns throughout Q2, CTAs continued to see volatile performance through the second half of the year, alternating positive and negative monthly returns. Funds of CTAs have been even more badly affected, and their 6.77% loss in 2015 is the lowest return of any strategy.

Other Key Hedge Fund Performance Statistics:

  • Systematic Funds Prosper: Systematic hedge funds saw healthier returns (5.92%) in 2015 than discretionary funds (2.32%), and were positive in December (0.18%). During such a tumultuous year it is no surprise that volatility funds recorded annual returns of 5.06%.
  • Bigger is Not Better: Despite recording four consecutive months of negative returns in June – September, small hedge funds posted gains of 2.93% in 2015, the highest of any size class. Large funds returned 2.17%, while emerging hedge funds gained 1.32% for the year*.
  • Asia-Pacific Funds Strong: Asia-Pacific-focused hedge funds weathered a 2.13% loss in the second half of 2015 to return 7.89% for the full year. North America saw the weakest returns of any geography, posting just 0.47% for 2015.
  • UCITS Keep Positive Returns: Despite a poor December in which they posted -0.82%, UCITS funds had positive performance in 2015, with returns of 0.31%. In contrast, alternative mutual funds lost 1.00% in December, and have posted -2.77% in 2015.

Comment:

“The hedge fund industry has been exposed to much of the financial turmoil of 2015, from the continuing fall in commodities prices to the loss of confidence in the Chinese stock market. These difficulties have created very difficult conditions for many firms, and left some investors questioning the ability of the industry to properly hedge losses in other markets.

CTAs in particular have been volatile throughout the year, and have posted negative returns in seven of the past 12 months, the highest in any calendar year since Preqin began tracking the industry. However, while the industry as a whole may be struggling to make gains, there are funds who have posted encouraging returns throughout the year. The challenge for investors in 2016 will be to identify which funds can offer real growth on their invested capital.”

Amy Bensted Head of Hedge Fund Products, Preqin

Hedge funds