Hedge Funds Post Mixed Results In February; Equity, Activist, Asia Focused Funds Hit Hard

Hedge Funds Post Mixed Results In February by Preqin

The Preqin All-Strategies Hedge Fund benchmark returns -0.06%, while CTAs gain 2.18%.

The hedge fund industry improved on losses of 2.69% in January but still posted negative performance of -0.06% in February. Macro strategies posted the greatest gains (0.55%) and are the only leading hedge fund strategy to hold a positive 2016 year-to-date return (0.88%). In comparison, credit strategies continued to struggle, recording their fourth consecutive month of negative returns with losses of 0.86%. 2016 YTD performance for the strategy is now at -1.92%.

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Meanwhile, CTAs continued their robust performance with gains of 2.18% in February. This represents their best monthly return since January 2015, and marks the first time in that period that CTAs have posted two consecutive months of positive performance. Building on gains of 0.95% in January, February’s returns take the 2016 YTD benchmark for CTAs to 3.15%.

Hedge Funds – Other Key Performance Statistics:

  • Systematic Strategies: Systematic hedge funds again outperformed discretionary funds, adding 0.91% in February to take year-to-date returns to 0.01%. Discretionary funds continued to suffer losses in 2016 YTD, with February’s return of -0.39% following January’s negative performance of -3.18%.
  • Equity Strategies Struggle: Equity strategies returned -0.08% in February 2016, following losses of 4.31% in January. However, many equity markets, such as the S&P 500 which lost 0.41% in February, suffered greater losses.
  • Emerging Funds Outperform: Emerging hedge funds (those with less than $100mn in AUM) were the only size class* to see positive returns in February posting 0.14%. Funds larger than $1bn returned -0.76%, while medium-sized funds (those between $500-999bn) saw the greatest losses of -1.00%.
  • Liquid Alternatives Post Further Losses: Alternative mutual funds and UCITS hedge funds posted further losses in February (-0.24% and -0.92% respectively). 12-month returns for both fund types are also negative, with alternative mutual funds at -6.55% and UCITS at -5.58%.
  • Emerging Markets Bounce Back: Emerging Markets funds posted gains of 1.61% in February, the greatest monthly returns of any geography, having lost 3.12% in January. North America-focused funds made gains of 0.21% and Europe-focused vehicles returned -0.31%.

Comment:

“Hedge funds posted a near neutral return in February 2016 as many traditional markets showed continued problems over the month. In a period where investors may be suffering large losses from traditional products in their portfolios, the ability of hedge funds to help investors weather turbulent markets and preserve investor capital is an attractive feature of these alternative funds to investors.”

Some strategies in particular, such as macro strategies and CTAs, can provide downside protection and uncorrelated returns and have demonstrated their worth so far in 2016. Fund managers will be looking to build on February’s performance in order to prove to their investors the value hedge funds can provide on a long-term risk-adjusted basis.”

Amy Bensted – Head of Hedge Fund Products, Preqin