September was a challenging month for global markets and the overall hedge fund industry was down for the month. According to Deutsche Bank’s latest Hedge Fund Trends report though, hedge funds outperformed compared with market indices.
The median fund lost 0.69 per cent last month while the MSCI World index was down 3.86 per cent and the S&P 500 was down 2.64 per cent. Median fund performance for all strategies now stands at 0.90 per cent through the end of the third quarter again outperforming major global indices as illustrated on figure 3 on the right. Market Neutral and Credit rank as the top performing strategies year to date (3.92 per cent and 1.91 per cent respectively). Dispersion of returns tightened in Credit, Convertible Bonds and Distressed but remained high across other strategies.
Within the equity long short space the year to date median performance for funds focused in Europe, Japan and China are all in the black relative to the median US equity long short fund which is down on the year. One observation from our capital introduction team is that equity funds (fundamental, quantitative and multi manager) that have low to market neutral net exposure, highly diversified portfolios with relatively high leverage are amongst the best performers as we close out Q3 2015.
Short interest in the S&P 500 rose 7.6 per cent to 8.25 billion shares during first half of September across all the sectors. Materials, Financials and Healthcare sectors witnessed the greatest increase in short exposure, up 11.2 per cent, 10.7 per cent and 10.0 per cent respectively. September saw the third straight consecutive monthly increase in short interest in the Energy and Industrials sectors.
