Latest figures from Eurekahedge reveal that hedge funds gained 1.01 per cent during the month of December, with 2016 returns coming in at 4.48 per cent.This compares with the MSCI AC World Index (Local) gaining 2.38 per cent in December with its 2016 returns coming in at 7.37 per cent.
The firm writes that North American equity markets traded higher in December as the Trump-driven reflation theme buoyed markets in a somewhat 'honeymoon' period post-election. The S&P 500 Index gained 1.82 per cent during the month, with the DJIA also up 3.34 per cent.
Eurekahedge writes that central bank actions in the developed world outside of the US have helped to mediate year-end jitters to some extent. “The ECB and BOJ remained committed to their current policies, which in turn also supported the performance of underlying equity markets. Ongoing political and economic events hold much uncertainty in store for 2017, and it remains to be seen how long markets will continue sing to the tune of Trump's rhetoric once he takes office later this month.”
Key highlights for December 2016 included the hedge fund gains with almost 19.7 per cent of the hedge funds posting double digit returns in 2016, up from 17.6 per cent in 2015.
For the first time since 2008, Eurekahedge reports that assets under management shrank, with the hedge fund industry contracting by USD21.8 billion in 2016, with investor redemptions of USD43.4 billion offsetting manager performance-driven gains of USD21.6 billion.
In 2015 the industry grew by USD108.7 billion, with USD80.7 billion of investor allocations driving the bulk of the industry growth. Among developed mandates, North American and Japanese hedge funds gained 7.77 per cent and 0.32 per cent respectively in 2016 while European fund managers were down 0.12 per cent.
Emerging market mandates have preserved their gains for 2016, Eurekahedge writes, up 7.31 per cent for 2016 with strong showing from underlying Latin America and Eastern Europe/Russia mandates. Frontier markets investing hedge funds, as represented by the Eurekahedge Frontier Markets Hedge Fund Index are up 10.76 per cent for 2016.
Among strategic mandates, distressed debt hedge funds posted the best 2016 returns, gaining 12.02 per cent, followed by event driven and relative value hedge funds which were up 9.70 per cent and 6.64 per cent respectively.
The Eurekahedge Long/Short Equities Hedge Fund Index is up 3.89 per cent for the year 2016 while underlying long-bias equity hedge funds gained 5.82 per cent. This compares with 3.15 per cent and -0.34 per cent respectively for 2015.
Asia ex-Japan hedge funds posted their fifth month of losses in 2016, and were up 0.66 per cent for 2016, down from a 6.44 per cent gain in 2015. Greater China mandates led much of the weakness during the year, posting their first annual loss in the last five years down 4.66 per cent in 2016 compared with a gain of 10.24 per cent the year before.
Among volatility-focused hedge funds, relative value volatility hedge funds posted the best performance for 2016, gaining 7.79 per cent, followed by short volatility hedge funds which gained 5.37 per cent over the same period.
