Hedge funds returned -2.60 per cent in January as the asset class recorded its worst monthly performance since 2012, with macro hedge funds the only top-level strategy to post positive returns at 0.98 per cent, according to Preqin.
In a month when leading equity indices posted significant losses — the S&P 500 posted -5.07 per cent and MSCI World posted -6.05 per cent — hedge funds pursuing equity strategies returned -4.28 per cent.
By contrast, CTAs started 2016 with returns of 1.38 per cent, their best monthly performance since they made gains of 3.75 per cent in January 2015. Funds of CTAs posted negative returns in 2015 of -6.77 per cent; however these funds recorded the highest return (+3.85 per cent) of any fund type in January 2016.
All Fund Sizes Negative: No leading fund size benchmark* emerged from January in positive figures but emerging fund sizes (less than $100 million) provided the best hedging, albeit with losses of 2.51 per cent. Medium hedge funds ($500-999 million) fell by 3.05 per cent and large hedge funds ($1bn+) by 2.87 per cent.
Volatility Hedge Funds Limit Damage: Following losses of 1.02 per cent in December, volatility hedge funds returned -0.13 per cent in January. This was a small loss compared to other hedge fund trading styles, especially in contrast to many other fund types and traditional markets, and their 12-month gains remain strong at 5.33 per cent.
Emerging Markets Slump: January saw emerging markets hedge funds lose 3.15 per cent for the month and sink into negative figures for 12-month returns (-1.38 per cent). In contrast, developed markets funds saw gains of 0.48 per cent up from -0.38 per cent in December, though North America-focused hedge funds returned -3.46 per cent in January.
Liquid Alts Suffer Again: UCITS posted negative returns for a second consecutive month recording -2.53 per cent in January. Alternative mutual funds suffered losses of -2.53 per cent, their greatest monthly loss since 2011.
“Having recorded gains of 2.02 per cent through 2015, the hedge fund industry began 2016 with negative returns. January was the lowest monthly performance for the industry since May 2012, as only a handful of fund types and strategies posted positive returns,” says Amy Bensted, Head of Hedge Fund Products at Preqin. “However, global economic headwinds have seen many public markets fall by in excess of 5 per cent, so the industry has successfully hedged the losses of some investors.
“CTAs saw their highest monthly performance since January 2015 while macro strategies were the only top-level hedge fund strategy to make gains in the first month of 2016. In light of the current market environment, these products — which can provide some non-correlation and downside protection — may see increased interest from investors over the coming months.”