In hedge funds, success no longer depends on size, as biggest managers fall behind industry average in 2020

Falling man

The biggest hedge fund managers are still lagging behind the wider industry’s performance on average in 2020, with larger strategies having fallen into the red over the past nine months while the industry overall is in positive territory, as hedge fund strategies of all stripes gave up some of their summer gains in September, according to new industry data.

The ten largest hedge funds reporting performance to eVestment lost 1.06 per cent in September, generally in line with the wider hedge fund industry, which fell just over 1 per cent.

But in the nine-month period since the start of January, larger managers dropped 1.44 per cent, while hedge funds as a whole remain in the black, at 1.04 per cent on average - once again reinforcing the recurring notion that bigger may not always be better when it comes to fund performance this year.

During the first half of the year, larger managers were down 5.75 per cent, while the industry on average was down 3.37 per cent between January and June.

That suggests bigger hedge funds ultimately failed to capitalise on the upwards swing in markets prior to September’s reversal, while the wider industry managed to edge into positive territory despite earlier losses in March following the Covid crash.

Elsewhere, eVestment metrics reveals that only a third (36 per cent) of hedge funds around the world notched up positive returns during September.  But, year-to-date, a majority of strategies (53 per cent) are in the black, with an average return of some 11.96 per cent. The average decline over the nine-month period to the end of September stands at -9.97 per cent.

Geographically, Asia-domiciled hedge funds – which were marginally down -0.17 per cent in September - remain comfortably ahead of the pack in 2020, up 7.82 per cent year-to-date.

In contrast, US hedge funds are up just 0.47 per cent over the same nine-month period, having lost 0.66 per cent in September. Continental European hedge funds gave back 1.54 per cent last month, to leave their YTD returns at just over 2 per cent. UK-domiciled hedge funds fell 1.47 per cent in September, and are up just 0.68 per cent since the start of 2020.