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Hedge Funds showing continued strength against S&P in April

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There has been a very long and very active debate over the value of hedge funds given their returns during 2014. But hedge fund managers may be showing their mettle as global financial and geopolitical volatility continues and the hedge fund industry is beginning to beat popular indexes, according to eVestment’s just-released April 2015 Hedge Fund Performance Report.

In April, hedge funds produced an aggregate return of +1.22 per cent, lifting 2015 year-to-date returns to +2.92 per cent, beating the S&P 500 returns of +0.96 per cent in April and +1.93 per cent year to date.

Among the variety of hedge fund strategies, some stood out more than others.
 
Rebounds in Russia and Brazil helped emerging markets hedge funds to post among the strongest returns in April, +6.28 per cent, the strongest returns for this hedge fund segment since March of 2013.

Large global macro hedge funds (those larger than USD1 billion in assets under management), were very strong performers in April as well, with returns of +2.15 per cent during the month, bringing their year-to-date returns to +3.50 per cent.

Credit hedge fund strategies produced strong performance in April of +2.25 per cent, by far these strategies’ best month since February 2014. Performance had been mixed, but mostly negative for the group since July 2014. Recently, returns have appeared highly influenced by exposure to European credits. A rebound in Euro corporate indices in April coinciding with credit funds’ strong month confirms the relationship. Funds focused on securitised credit markets also produced positive returns in April, +1.26 per cent.

Event driven strategies were positive in April, returning +1.35 per cent, bringing year-to-date 2015 returns to +2.33 per cent.

Distressed hedge fund strategies produced returns of +0.72 per cent, their third consecutive monthly increase. This is a welcome positive streak for distressed investors after enduring a seven-month drawdown ending January 2015 which produced average declines of -6.83 per cent.
 
“It’s easy to undervalue the importance of hedge fund strategies and active management in general during the kind of bull market we’ve enjoyed for the last few years,” says Peter Laurelli, eVestment vice president and head of research and author of the new report. “It’s when things become less certain and more volatile that hedge funds really show their strength for investors looking to diversify with a variety of investment types as they seek to grow and protect their assets.”

There were some weak spots in the hedge fund industry as well.
 
Managed futures funds posted their first monthly loss since October 2014, falling -0.67 per cent and ending a five-month string of gains which saw the universe produce cumulative returns of nearly 6 per cent. The declines came as the dominant trends of declining oil prices and United States dollar strength both shifted in April.

Large managed futures strategies, which have also been virtually the sole beneficiaries of investor interest returning to the segment in Q1 2015, posted some large declines in April. Returns from funds with  more than USD1 billion in AUM were -3.62 per cent during the month. This ends a string of eight consecutive months of gains during which large managed futures funds returns an average of +17.89 per cent.

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