Hedge funds, which have struggled to match the performance of mutual funds and equities for most of the year, trended up in September as the Eurekahedge Hedge Fund Index grew 1.05 percent.
Strong equity and event driven funds
“Long/short equity and event driven funds posting the strongest returns on the back of strengthening equities during the month. Long/short equity funds were up 2.10 percent while event driven managers gained 1.90 percent,” according to a Eurekahedge newsletter. Investing in distressed debt has been the strongest strategy YTD, while CTA/managed futures posted their fifth straight month of losses. Managers exposed to precious metals, energy, and soft commodities in particular took a hit as the S&P Goldman Sachs Commodity Index fell 3.39 percent. The MSCI World Index gained 3.87 percent during the same time frame, both driving hedge fund growth and outpacing it.
Many well-known hedge fund managers are also philanthropists, and many of them have their own foundations. Seth Klarman of Baupost is one of those with his own foundation, and he invested in a handful of hedge funds through his foundation. This list of Klarman's favorite hedge funds is based on the Klarman Family Foundation's 990 Read More
Hedge funds have had a hard time this year, partially because there simply aren’t that many attractive investment opportunities out there. D.E. Shaw closed its flagship Composite fund to new investors recently, following a wave of similar decision by other firms, and the Baupost Group is planning to return some client capital this year because they don’t have enough opportunities to invest. Hanging on to unproductive cash dilutes the opportunities that do exist among more investors, bringing down a fund’s returns as a percentage of AUM.
Hedge funds and global recovery
But a strong September could be a sign that hedge funds are finally taking part in the global recovery, and just in time for new rules that will allow U.S. funds to advertise publicly for investors. Some hedge fund managers are doubtful that this will actually prove to be fruitful, but it does open up a lot more capital, even if it comes in smaller packages.
Asian hedge funds are doing better than their American counterparts, according to the Eurekahedge newsletter. Asian hedge funds excluding Japan have outperformed their underlying markets by 7 percent YTD, while Japanese hedge funds were up an amazing 21.25 percent YTD. Total assets under management in the global hedge fund industry are also on the rise, currently at $1.91 trillion and likely to set a new historical record by the end of the year.