Activist hedge funds outshine the competition, as larger managers trail the rest of the industry

Financial data

Activist-focused managers comfortably outperformed other strategy types last month, as the hedge fund industry continues to recover from the Covid-19 turmoil with solid August gains and positive year-to-date returns, new eVestment data shows.

Activism-focused hedge funds rose 7.88 per cent in August. Known - and sometimes feared - for their often-combative approaches to investing, which include a range of tactics and methods to effect board level change and improve shareholder value, such funds have now made 3.25 per cent on average this year, eVestment said.

That number is still down sharply from their 17.46 per cent gain last year, which itself represented a stellar comeback following a torrid 2018, when activists lost more than 10 per cent for the year.

Overall, new eVestment metrics show that most hedge fund types and strategies are now in positive performance territory this year.

Hedge funds added some 2.5 per cent on average in August, bringing their year-to-date returns to 2.21 per cent. That suggests the industry is broadly regaining its footing following a challenging few months amid the coronavirus crisis.

Long/short equity funds, often seen as a standard-bearer in the alternative investment universe, made 3.91 per cent last month, and have now generated 3.10 per cent year-to-date. Despite their strong showing, long/short managers remain “a long way” from the 2019’s 14.30 per cent annual return, eVestment said on Monday.

Elsewhere, the 10 largest hedge funds reporting into eVestment have posted on average returns that are “meaningfully below” the overall industry benchmark - suggesting size is still not a decisive indicator of success.

The 10 biggest funds were up just 0.32 per cent in August, against 2.5 per cent for the wider industry. Similarly, since the start of the year, the largest hedge funds have added 1.21 per cent, trailing the wider industry which is up 2.21 per cent.