The Preqin All-Strategies Hedge Fund benchmark recorded gains of 0.91 per cent in September, marking the seventh successive month of positive performance as the industry delivered returns of 4.06 per cent through the third quarter.
These gains mark an improvement from both Q2 and Q1, in which they posted returns of 2.13 per cent and -0.81 per cent respectively.
It represents the best quarterly performance since Q1 2013, when the industry returned 4.10 per cent. In 2016 YTD, hedge funds have posted total gains of 5.41 per cent despite suffering loses at the beginning of the year.
All leading hedge fund strategies posted gains through Q3, with macro strategies representing the lowest quarterly gains (+1.94 per cent), and equity strategies posting the highest returns (+5.18 per cent).
Event driven strategies returned 4.59 per cent in Q3 to take their 2016 YTD performance to 7.90 per cent, the highest of any strategy.
By contrast, relative value strategy funds posted year-to-date gains of 3.11 per cent, the lowest of any strategy.
Credit and macro strategies are the only leading funds to have posted gains in all three quarters through 2016, and have returned 5.85 per cent and 5.27 per cent YTD respectively.
Activist funds generated robust returns of 5.49 per cent in Q3, taking 2016 YTD performance to 5.95 per cent. Volatility trading funds posted gains of 2.18 per cent over the third quarter of 2016 and have added 6.74 per cent through the year so far.
North America-focused hedge funds delivered the highest returns of any region in Q3 (+5.14 per cent). Emerging markets-focused funds have the best performance of any region in 2016 YTD, with returns of 8.87 per cent; Europe-focused funds have posted 1.32 per cent in 2016 YTD, the lowest of any region.
CTAs have failed to maintain the momentum they generated in the first half of 2016, and have posted overall losses of 1.82 per cent in Q3. This sees 2016 YTD returns fall to 0.97 per cent, and 12-month performance dip to 0.22 per cent.
Emerging hedge funds saw the greatest returns of any size classification in Q3, generating 4.27 per cent, while large hedge funds saw the smallest gains (+2.94 per cent). Across the year so far, emerging funds lead the way with returns of 6.04 per cent, while large hedge funds have posted gains of 2.27 per cent.
Although discretionary funds suffered losses in Q1 (-1.58 per cent), returns of 4.52 per cent in Q3 have taken 2016 YTD performance to 4.85 per cent. In contrast, systematic funds posted far smaller gains of 1.65 per cent through Q3, and their performance through the year so far stands at 3.81 per cent.
“Hedge funds have delivered consistent positive returns over the past seven months, marking the Preqin All-Strategies Hedge Fund benchmark’s longest successive run of monthly gains since 2012-2013,” says Amy Bensted (pictured), head of hedge fund products at Preqin. “In the current environment, in which an unprecedented proportion (79 per cent) of investors stated to Preqin in June that they were dissatisfied with the performance of their hedge fund portfolios over the past 12 months, fund managers and investors alike will welcome this run of solid returns.
“Within the universe of 22,810 funds open to investment, it has been the smallest funds – those with less than USD100 million in assets – that have had the most success in terms of performance in 2016. With a large proportion of inflows over the last few years going to the largest managers in the hedge fund industry, we may see investors look towards the smaller end of the spectrum in their search for hedge fund returns going forward.”
