Overall, the hedge fund industry continued to produce positive aggregate returns in November, its 13th consecutive positive month. The industry remains on pace for its best year since 2013.
Underlying the average gains were mixed returns during the month, highlighted by further gains from funds focused on equity markets (activists, long/short and quant equity), and a mix of winners and losers from multi-market strategies. Both macro and managed futures universes followed strong showings in October with near flat results containing a variety of outcomes, highlighting what a difficult year it has been for both systematic and discretionary approaches to get a handle on both market-level and macro themes.
Highlights
- Hedge funds returned an average of +0.47% in November, and are +7.70% YTD in 2017.
- 80% of the industry is positive in 2017, however November had the lowest proportion of monthly gainers of the year (58%).
- Activists and long/short equity strategies are both up an average of over 10% in 2017.
- Brazil exposure was a drag on EM returns for a second consecutive month in November.
Industry Positive for 13th Consecutive Month, Activists and Long/Short Equity Now Over 10% YTD
Hedge funds returned an average of +0.47% in November 2017. Last-twelve-month returns are +8.77% and YTD the industry is +7.70%, continuing on pace for its best year since 2013.
Key Points
- Equity related strategies have separated themselves from the rest of the industry in 2017.
Activists, long/short and quant equity strategies are producing average returns at least 300bps higher than all other primary strategies in 2017. - Managed futures followed an excellent October with mixed results.
October was an excellent month for managed futures strategies. Given the path the universe’s returns have taken over the last couple of years, a flat November could be seen as good news. At the fund level, however, it was nearly 50-50 winners/losers during the month, and average losses outpaced average gains. Given how in lockstep returns moved in October, seeing November’s dispersion, even among the largest products, is a reminder of the distinct nature of each product’s systems. - Macro strategies show mixed results in November, and YTD.
While just more than half (57%) of macro managers were positive in November, and nearly 70% are up YTD, November’s average return was negative for the third monthly decline of 2017. Average gains are below average losses, sharing that distinction with commodity and FX managers. Results among the largest macro funds have been very mixed, resulting in average gains for the 10 largest to lag their peers. - FX/Currency average returns are the industry laggards in 2017.
This year has proven to be a very difficult one for FX managers. While some have been able to produce positive returns (the best being EM-currency focused), less than half have done so in 2017. The differential between average gains and losses is surpassed by commodity strategies, but FX managers have the lowest proportion of winners of any segment in 2017.
Losses from Exposure to Brazil Had EM Lagging DM in November
Emerging market strategies YTD returns are still far ahead of developed market-focused funds in 2017, however the gap has been narrowing in recent months.
Primary Regional Exposure
- Brazil funds produce second consecutive monthly decline in November.
What had been a three horse race for best segment in the industry in 2017 between Brazil, China and India, is now down to just two. Brazil-focused funds followed October’s near 4% decline with average losses again in November. - China hedge funds continue to lead the industry in 2017.
Gains from China-focused funds were surpassed by those focused on India in November, though not by enough for India funds to surpass those focused on China for YTD supremacy.
Article by eVestment
