Hedge Funds Performance Loses Momentum In October

The hedge funds industry recorded minimal gains of 0.01% through the month, following positive run through much of the year



The hedge fund industry saw its lengthy run of positive performance taper off in October, as funds recorded net returns of 0.01%. Most leading strategies recorded modest gains, with credit strategy funds returning 0.84%, and relative value funds returning 0.49%. However, equity and event driven strategy funds both saw losses, returning -0.27% and -0.26% respectively, contrasting with their position as the highest-performing leading strategies in September.

While most commingled hedge fund benchmarks were close to 0.00% in October, other fund types were underwater for the month. UCITS funds returned -0.15% for the month, while alternative mutual funds made more substantial losses of 1.40%. As a result, both fund types have recorded losses for the past 12 months, returning -0.23% and -0.93% respectively. CTAs, meanwhile, recorded their third consecutive month of losses, as they returned -1.74% in October. This run of negative performance has resulted in YTD losses of 0.86%, and 12-month losses of 0.47%.

Hedge Funds Performance

Hedge Funds – Other Key Performance Facts:

  • Longer Term Returns: Although October does not maintain the momentum of positive performance that the industry has recorded since March, hedge funds have still posted overall gains of 5.46% so far in 2016, and 4.99% over the past 12 months. As long as no further losses are posted, 2016 will mark the highest performance year for the industry since 2013.
  • Performance by Region: Hedge funds focused on North America and Europe both recorded losses in October, returning -0.76% and -0.39% respectively. Asia-Pacific-focused funds, however, made gains of 0.46%, while emerging markets hedge funds returned 2.35% for the month, far beyond any other region.
  • Discretionary Gains: Hedge funds using a discretionary trading methodology once again outperformed systematic funds, as they made gains of 0.13% compared to the latter’s -0.52% performance. In 2016 so far, discretionary funds have now returned 4.94%, compared to 3.34% for systematic funds.
  • Returns by Size*: October performance shows little variance according to fund size, but it is notable that emerging funds once again posted the highest returns, gaining 0.30%. Small and medium hedge funds both saw losses, returning -0.04% and -0.03% respectively for the month.


“Despite many hedge fund investors stating that they are dissatisfied with the returns of their hedge fund portfolios, the hedge fund industry over recent months has seen a period of positive performance unmatched since 2012-13. Unfortunately, in October this seems to have lost momentum, as the industry recorded near-flat performance. However, many strategies and geographies have continued to make modest gains through the month, and the industry as a whole has not lost ground. Provided they can hold these gains in the last two months of the year, hedge funds are on course to mark their highest performance year since 2013.

Among other fund structures, however, the overall picture is less positive. CTAs, alternative mutual funds and UCITS funds are all showing negative performance over the past 12 months, and recorded losses in October. CTAs in particular have experienced their third consecutive month of losses, and are currently on course to record lower performance in 2016 than they did in 2015.”

Article by Amy Bensted – Head of Hedge Fund Products, Preqin