December was another difficult month for the hedge fund industry, as the Preqin All-Strategies Hedge Fund benchmark recorded performance of -0.40 per cent.
This puts full-year performance for 2015 at 2.02 per cent, the lowest yearly return since 2011, when hedge funds posted -1.77 per cent. December’s losses mean that hedge funds have posted negative returns in five months of the year, while only three months saw them gain more than 1.00 per cent. All top level hedge fund strategies experienced losses in the final month of 2015, with equity strategies posting a negative return of -0.64 per cent, and credit strategies returning -0.55 per cent. For the year as a whole, the majority of strategies posted positive returns, but event driven strategies recorded losses of 0.07 per cent while relative value strategies gained 5.03 per cent.
CTAs have experienced a particularly turbulent year, and have finished 2015 with a loss of 0.49 per cent, compared to their 10.86 per cent gain in 2014. Having posted negative returns throughout Q2, CTAs continued to see volatile performance through the second half of the year, alternating positive and negative monthly returns. Funds of CTAs have been even more badly affected, and their 6.77 per cent loss in 2015 is the lowest return of any strategy.
Systematic hedge funds saw healthier returns (5.92 per cent) in 2015 than discretionary funds (2.32 per cent), and were positive in December (0.18 per cent). During such a tumultuous year it is no surprise that volatility funds recorded annual returns of 5.06 per cent.
Despite recording four consecutive months of negative returns in June – September, small hedge funds posted gains of 2.93 per cent in 2015, the highest of any size class. Large funds returned 2.17 per cent, while emerging hedge funds gained 1.32 per cent for the year.
Asia-Pacific-focused hedge funds weathered a 2.13 per cent loss in the second half of 2015 to return 7.89 per cent for the full year. North America saw the weakest returns of any geography, posting just 0.47 per cent for 2015.
Despite a poor December in which they posted -0.82 per cent, UCITS funds had positive performance in 2015, with returns of 0.31 per cent. In contrast, alternative mutual funds lost 1.00 per cent in December, and have posted -2.77 per cent in 2015.
“The hedge fund industry has been exposed to much of the financial turmoil of 2015, from the continuing fall in commodities prices to the loss of confidence in the Chinese stock market,” says Amy Bensted, head of hedge fund products at Preqin. “These difficulties have created very difficult conditions for many firms, and left some investors questioning the ability of the industry to properly hedge losses in other markets. 
CTAs in particular have been volatile throughout the year, and have posted negative returns in seven of the past 12 months, the highest in any calendar year since Preqin began tracking the industry. However, while the industry as a whole may be struggling to make gains, there are funds who have posted encouraging returns throughout the year. The challenge for investors in 2016 will be to identify which funds can offer real growth on their invested capital.” 
Amy Bensted – Head of Hedge Fund Products, Preqin 

