Bigger may not necessarily be better: Largest hedge funds still down in 2020, lagging industry average

Financial data

Larger hedge funds’ performance in 2020 remains “significantly” below industry averages, according to new industry stats, suggesting that bigger may not necessarily be better when it comes to managers recouping losses suffered earlier in the year.

The ten largest hedge funds reporting to eVestment remain some 4.61 per cent in the red year-to-date, despite posting a 1.31 per cent gain in July.

In contrast, hedge funds overall are now flat for the year, at 0.00 per cent, having registered a 3.43 per cent rise last month to successfully claw back losses suffered in H1.

“Size appears to be something of a hindrance so far this year,” eVestment said in a note on Thursday.

Reflecting this point, the ten largest long/short equity strategies tracked by eVestment have shed almost 10 per cent so far this year, despite adding 2.81 per cent in July. By comparison, the long/short equity grouping overall is down just 0.88 per cent over the seven-month period, having added 3.40 per cent last month.

However, eVestment stressed that even among the very large funds, several have performed well.

Dispersion continues to define industry performance this year, with the industry essentially split down the middle. Roughly 50 per cent of hedge funds are producing positive returns in 2020, with the average gain among performance winners at 10.83 per cent year-to-date. On the flip-side, the average year-to-date loss among those managers posting losses is 10.98 per cent.

Overall, event driven – activist strategies were the best performers in July, notching up a 7.55 per cent gain. While they remain down 1.33 per cent YTD following the coronavirus market turmoil, eVestment suggested that the strategy is now on a surer footing as opportunities arise in the post-Covid ‘new normal’.