The hedge fund industry produced an aggregate return of -0.26 per cent in November, bringing YTD returns deeper into negative territory for 2015, -1.21 per cent, according to eVestment’s latest hedge fund performance review.
The industry’s last annual decline was 2011 when average returns were -4.99 per cent and the S&P rose +.11 per cent.
Despite overall industry returns being negative in 2015, the distribution of returns across funds is very slightly in favour of positive performance (50.2 per cent positive, 49.8 per cent negative). The average positive return is 7.28 per cent and the average negative return is -9.23 per cent.
2015 returns are most positively skewed for Origination & Financing strategies. 88 per cent of O&F funds are up for the year with an average increase of 7.52 per cent, compared to an average decline of -2.76 per cent. The most negatively skewed major segment is distressed, with 85 per cent of products negative for the year with an average decline of -9.32 per cent.
November was the fifth consecutive month in which managed futures returns were directionally different from the month prior. Average gains of 1.64 per cent still leave the universe -1.16 per cent YTD.
Large managed futures funds, those >USD1 billion and which have received the vast majority of the universe’s asset inflow in the last year, returned 1.92 per cent in November which brings YTD returns to 3.07 per cent, significantly outperforming smaller, <USD1 billion, managed futures managers in 2015 which are -1.1 per cent. Returns from the big-funds group have been more volatile in 2015.
Macro funds were also positive in November, 0.54 per cent, however the group remains negative for 2015 at -1.75 per cent. There is not the same performance distinction between large and small macro managers in 2015 as we see among managed futures funds. Average returns from both >USD 1billion and <USD1 billion funds are negative YTD.
When specific market-focused macro funds are removed, creating a universe of broad, multi-market macro funds, which would be considered the classic global macro strategy, returns for the year are better. This “pure” macro universe returned 1.15 per cent in November and is very slightly positive in 2015, 0.22 per cent.
Credit strategies posted their largest aggregate monthly decline since the financial crisis in November, falling -1.44 per cent. The decline was their fifth in the last six months and the group is -2.64 per cent YTD which, if ending the year down, would be their first decline since 2008.
Directional credit has produced the highest concentration of negative results in the credit space this year. 62 per cent of funds are down for 2015 with average declines of -6.51 per cent compared to average gains of 3.45 per cent
Brazil exposure led emerging market hedge fund returns to the downside in November. A decline of -1.16 per cent during the month puts the Brazil universe -29.26 per cent YTD. 2015 returns could well eclipse 2008 as their worst year since eVestment’s data began to track the universe in 1998.
China-focused funds were near flat in November, avoiding the majority of potential losses from the country’s equities. The universe outperformed the MSCI China Index by nearly 350bps in November. With YTD returns of 6.11 per cent, China funds have significantly outperformed long- only index exposure to the country. The MSCI China Index was -6.40 per cent YTD through November.
India-focused fund returns of -0.91 per cent in November pushed the universe negative for 2015, -0.04 per cent. Flat returns in 2015 follow a huge 40.54 per cent gain in 2014
Products operating out of Hong Kong continue to outperform all other regional and country specific fund domiciles in 2015, primarily due to the predominance of China-focused products. The universe has widely outperformed China-domiciled products, which in turn have still outperformed Chinese equities.
