Hedge fund managers generated further positive returns across all strategy types in October, which has swelled total global industry assets to a record USD4.04 trillion.
Hedge fund managers generated further positive returns across all strategy types in October, which has swelled total global industry assets to a record USD4.04 trillion.
New October performance data published by Hedge Fund Research shows the industry on track to outperform last year’s full-year returns, while HFR described the increased asset volumes as a “historical milestone of growth and expansion.”
Hedge fund managers have now advanced 11.44 per cent over the last 10 months, with HFR’s main Fund Weighted Composite Index – which measures the monthly returns of some 1400 single manager hedge funds across all strategy types – gaining 1.85 per cent in October, reversing September’s 0.24 per cent slide. By comparison, the benchmark finished 2020 up 11.83 per cent for the year.
HFR president Kenneth Heinz said recent growth has been fueled by strong performances across high and low beta, equity, fixed income, commodity and currency strategies, and emerging and established managers.
Long/short equity hedge funds outflanked other strategies last month, rising more than 2 per cent to bring their year-to-date returns to 13.27 per cent. Quantitative directional was the standout equity strategy in October, advancing 9.21 per cent, while energy and basic materials-focused managers rose 3.55 per cent amid the ongoing oil and gas price rally.
Healthcare, tech, fundamental growth and multi-strategy equity hedge funds all advanced more than 2 per cent, with only equity market neutral strategies ending October in the red, sliding 0.23 per cent.
With two months left to go until the end of 2021, the majority of equity-focused hedge funds are in double-digit territory for the year, including energy/basic materials (26.12 per cent), quant directional (17.36 per cent), fundamental value (16.82 per cent), and multi-strategy (13.92 per cent).
Event driven hedge funds – which trade stock mispricings and other valuation anomalies stemming from mergers and acquisitions, bankruptcies, takeovers and other corporate events – were up 1.32 per cent during October, and have now gained 12.71 per cent this year.
Here, activist strategies took the biggest gains, both on a monthly (3.27 per cent) and year-to-date (16.25 per cent) basis. Special situations managers have advanced almost 15 per cent this year, aided by October’s 2.49 per cent return, while merger arbitrage’s 1.19 per cent monthly rise has pushed their YTD performance 10.26 per cent. Fund managers running distressed and restructuring remain up more than 14 per cent in 2021, despite ending October down by 0.59 per cent.
Meanwhile, macro hedge funds – which look to capitalise macroeconomic and geopolitical trends using equities, bonds, currencies, and commodities, among other assets – scored a 1.33 per cent October return, pushing year-to-date gains to 9.53 per cent.
Commodity-based macro hedge funds rose 0.78 per cent, and are now up an impressive 21.49 per cent for the year. Systematic diversified managers were the best monthly macro performers, rising 2.50 per cent in October, swelling YTD returns to more than 10 per cent. On the downside, currency-focused strategies tumbled 4.37 per cent, leaving them down 4.22 per cent YTD, while discretionary thematic macro funds also lost more than 2 per cent in October.
Fixed income relative value hedge fund strategies, which are sensitive to rate movements, posted a narrow 0.71 per cent advance in October. Year-to-date, the sector has gained 8.15 per cent, HFR’s data shows.
Convertible arbitrage managers gained more than 2 per cent in October, as asset-backed strategies just over 1 per cent, with both now up some 8 per cent YTD. Multi-strategy relative value hedge funds are up 7.45 per cent so far in 2021, despite sliding 0.28 per cent last month, while volatility managers’ 1.19 per cent October rise brings their YTD gains to almost 3 per cent.
Emerging markets hedge funds also registered gains last month, rising 0.63 per cent, bringing YTD returns to 8.12 per cent.
“The hedge fund industry surpassed a historic milestone in October, as performance-based gains across all strategies drove total industry capital to exceed USD4 trillion for the first time in history,” Heinz said.
“The milestone also marks a sharp reversal from April 2020, when industry capital fell below USD3 trillion at the beginning of the global pandemic.”
