Observer Consensus: 7-Month Hedge Fund Surge At End

 Stockholm (HedgeNordic) – The verdict on October is in, by consensus of several major hedge fund observers, pointing to a universal drop across the hedge fund industry globally.

According to the Preqin All-Strategies Hedge Fund Benchmark, hedge fund database Eurekahedge and eVestment, the hedge fund industry finally saw its 7-month positive run come to a halt. As previously reported by HedgeNordic, eVestment found global hedge fund performance to be -0.76% in October. Now Eurekahedge pegs the decline at -0.35%, while Preqin recorded net returns of just 0.01%.

While most leading strategies, credit strategy funds and relative value funds among them, recorded modest gains during the month, Preqin reports, equity and event driven strategy funds both saw losses, returning -0.27% and -0.26% losses respectively. UCITS funds returned -0.15% for the month, while alternative mutual funds made more substantial losses of -1.40%. CTAs recorded their third consecutive month of losses, returning -1.74%. However, hedge funds have still posted overall gains of 5.46% so far in 2016, with 4.99% YTD. Emerging markets led the month’s performance with returns of +2.35%, far more than any other region.

“Unfortunately, in October this [the period of positive performance the past 7 months unmatched since 2012-2013]seems to have lost momentum, as the industry recorded near-flat performance,” says Amy Bensted, head of hedge fund products at Preqin. “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,” adds Ms Bensted, “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.”

Additionally, according to the latest figures released by EurekaHedge, hedge funds declined by 0.35% in October, albeit that the database also found hedge funds were up 2.98% YTD, with 20% of managers posting double-digit returns by comparison with 15% at the same point last year.

Eurekahedge found that Emerging Markets mandates again lead 2016 gains, this time up 10.18%. Distressed debt hedge funds posted the best returns in October and YTD, gaining 2.27% and 10.99% respectively. Strategic mandates posted the steepest declines in October, according to the Eurekahedge CTA/Managed Futures Hedge Fund Index, which was down 2.11%, with underlying trend following strategies declining 3.71% and commodity focused hedge funds losing 1.19%. Event driven hedge funds were also negative for October, declining 1.23%, followed by long/short equities and arbitrage hedge funds following mixed performance of global equity markets during the month.

Observers await the post-U.S. election hedge fund industry results for November with baited breath.

 

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About Author

Glenn W. Leaper, Associate Editor and Political Risk Analyst with Nordic Business Media AB, completed his Ph.D. in Politics and Critical Theory from Royal Holloway, University of London in 2015. He is involved with a number of initiatives, including political research, communications consulting (speechwriting), journalism and writing his post-doctoral book. Glenn has an international background spanning the UK, France, Austria, Spain, Belgium and his native Denmark. He holds an MA in English and a BA in International Relations.

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