The hedge fund industry posted overall returns of 2.17 per cent in July, the fifth consecutive month of positive performance and largest cumulative period of gains since May 2013, with the industry returning 6.96 per cent since the beginning of March.
As a result, 2016 YTD returns now stand at 3.67 per cent, and 12-month performance has returned to positive territory for the first time since December, at 1.58 per cent.
All leading strategies posted positive returns for the month, with equity strategies (+2.78 per cent) and event driven strategies (+2.71 per cent) in particular making gains.
For 2016 so far, event driven strategies (+6.13 per cent) and macro strategies (+4.57 per cent) have the highest performance, with equity strategies (-0.12 per cent) being the only fund type which is still showing negative 12-month returns.
In the wake of Britain’s vote to leave the EU, 31 per cent of hedge fund managers surveyed by Preqin stated that they expected Brexit to have a positive impact on performance. In July, European hedge funds recorded gains of 2 per cent, the highest monthly performance in over a year, but lower than seen for funds in North America and Asia-Pacific, which returned 2.68 per cent and 2.26 per cent respectively. Europe is also the only region which is still showing losses in 2016 YTD, at -0.49 per cent, while Asia-Pacific funds have made gains of 0.17 per cent, and North America performance stands at 4.85 per cent.
Hedge funds less than USD100 million saw the highest July performance of any size classification, at 2.24 per cent, and have the highest YTD returns of 4.10 per cent. Large hedge funds of USD1bn or more saw the lowest returns in July, at 1.28 per cent, and their gains of 0.54 per cent in 2016 YTD are the lowest of any size.
CTA funds followed June’s gains of 2.22 per cent by returning 0.30 per cent in July, taking 2016 YTD performance to 2.94 per cent. This is only the second time CTAs have recorded two consecutive months of positive returns since March 2015.
Activist hedge funds posted returns of 3.67 per cent in July, their highest performance since February 2012. Hedge funds using a volatility-based trading method returned 1.59 per cent for the month, their sixth consecutive month of gains.
Despite making gains of 1.16 per cent in July, funds of hedge funds are still recording losses of 2.10 per cent for the year so far. This is the first time funds of hedge funds have recorded monthly performance of more than 1 per cent since February 2015.
Both alternative mutual and UCITS funds recorded positive performance in July, of 1.07 per cent and 1.60 per cent respectively. However, while alternative mutual funds are now posting YTD gains of 1.96 per cent, UCITS funds are still showing losses, at -0.38 per cent.
“After a difficult start at the beginning of the year, 2016 has now proved to be a positive year for hedge fund performance, with July marking the fifth straight month of industry gains,” says Amy Bensted (pictured), head of hedge fund products at Preqin. “The strong returns in July have overcome losses incurred in the latter part of 2015; 12-month performance has returned to positive territory for the first time this year.


“The opinion of hedge fund managers was divided on the issue of Brexit; in turn some funds have made successful gains or lost considerably on the outcome. However, the broader hedge fund industry in Europe seems to have taken some advantage of the opportunities offered in the wake of the vote. Although returns do not match those seen in North America, this still marks the best performance month for the region since February 2015.”
