April hedge fund returns were generally positive with 2/3 of reporting funds up during the month, but smaller funds outperformed larger managers, a trend which has persisted throughout the year, according to eVestment’s latest Hedge Fund Performance report.
Commodity funds excelled in April and distressed funds rebounded for a second consecutive month. There were pockets of losses from macro and large managed futures funds which weighed on industry returns.
Commodity hedge funds produced average aggregate returns of +4.10 per cent in April, bringing YTD returns to +6.01 per cent. The group benefitted from a surge of higher prices across the commodity spectrum during the month, something which appeared to hurt larger managed futures funds.
After more than three years of negative investor sentiment, investors returned to the commodities segment in June 2015 and have since allocated $5.4 billion. It is worth noting that investors appeared ahead of the curve, allocating to the segment while performance was still in decline in 2015. 2016 is the third best Jan-Apr start in the last ten years for commodity hedge funds, behind 2011 (+14.66) and 2008 (+12.89 per cent).
After a significant stretch of losses, creating a drawdown dating back to July 2014, credit hedge funds posted their second consecutive large gain in April. The group returned an average of +2.15 per cent, which brings YTD returns positive, +1.92 per cent.
In the last two months, credit hedge funds have posted their best monthly results since the world was exiting the global financial crisis. Not since July and September 2009 has this universe of credit hedge funds seen their aggregate positioning lift them by as much as in March and April 2016. This should put into perspective the significance of the opportunity for gains, and losses, credit strategies have faced in the last two years. The main difference between the current period and the financial crisis was the length of time. During the crisis, losses were focused in a three-month span.
Activist hedge funds posted a second consecutive positive month in April, returning an average of +1.27 per cent. Gains in April followed a significant rise in March and the group is now +1.13 per cent in 2016, slightly underperforming the S&P 500 TR and global equity benchmarks.
Managed futures hedge funds have taken in more new money than any other hedge fund segment in 2016. Performance in April was slightly positive in aggregate, however larger funds, those which gained the most new money in 2015, were negative, -2.19 per cent. For the year, large managed futures funds are +0.21 per cent and lag their smaller peers.
Multi-strategy funds, the industry’s biggest asset gainers in 2015, had been under pressure to begin 2016. The group posted slight gains in April, a third consecutive positive month after three consecutive monthly declines into January 2016.
