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Strong Q2 hedge fund performance drives overall gains

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The Preqin All-Strategies Hedge Fund benchmark reveals that hedge fund performance stabilised in the second quarter of 2016 following a volatile start to the year, and recovered from losses seen in Q1.

The industry posted gains of 0.15 per cent in June, despite global market turbulence leading up to and following the Brexit vote; this represents a fourth consecutive month of positive performance.
 
his streak of positive industry performance has resulted in hedge funds reporting returns of 2.15 per cent for the second quarter, which in turn, has driven overall gains of 1.36 per cent through H1 2016. Despite this, 2016 represents the lowest H1 performance for the hedge fund industry since 2008, when funds saw losses of 0.53 per cent.
 
Macro strategies generated the strongest returns in June with gains of 1.15 per cent, and are also outperforming all other leading hedge fund strategies across H1 with performance of 3.18 per cent.
 
Credit strategies funds also saw positive returns in June, making gains of 0.44 per cent, and overall have posted robust H1 gains (+2.53 per cent), while multi-strategy funds were the only other strategy to record gains (0.40 per cent) in June.
 
Other leading hedge fund strategies recorded small monthly losses; equity strategies returned -0.02 per cent and relative value funds saw negative performance of -0.10 per cent. Event driven strategies experienced the worst performance in June (-0.50 per cent), yet are still posting gains of 1.74 per cent through H1.
 
After four consecutive months of positive performance, the GBP benchmark returned -0.89 per cent in June, while the EUR benchmark also suffered losses of -0.55 per cent. Hedge funds based in the UK recorded negative returns of 0.64 per cent through June, with H1 2016 performance standing at -1.13 per cent.
 
Despite losses of 1.00 per cent in May, CTAs returned 2.72 per cent through June to post positive performance of 1.75 per cent through Q2. January and February marked the first time since 2014 when CTAs saw two successive months of gains, and the robust returns of 3.27 per cent through H1, reflect this relative consistency.
 
Emerging hedge funds were the only size classification to record gains (+0.39 per cent) in June, and also recorded the best Q2 (+2.50 per cent) and H1 (+1.89 per cent) performance. Hedge funds larger than USD1 billion returned -0.02 per cent in June, with medium-sized funds seeing the biggest losses in H1 (-0.70 per cent).
 
Volatility hedge funds recorded a fifth successive months of gains with returns of 0.07 per cent in June, taking H1 performance to 2.18 per cent. Activist funds recorded small monthly losses of -1.28 per cent, while systematic funds (+0.91 per cent) saw greater returns than discretionary funds (-0.37 per cent) in June.
 
UCITS posted performance of -0.73 per cent through June, ending H1 2016 with overall losses of 1.73 per cent. In contrast, alternative mutual funds returned 0.40 per cent in June, driving quarterly gains of 1.53 per cent, and positive performance of 1.27 per cent in H1.
 
“It has been a mixed picture for hedge funds in the first half of 2016. Suppressed commodity prices and turbulence in global markets led to a difficult environment in January and February,” says Amy Bensted (pictured), head of hedge fund products at Preqin. “Since then, however, the industry has rallied, with all leading strategies, liquid alternatives and CTAs posting gains through the second quarter.

“While investors will continue to monitor hedge fund performance closely over the second half of the year, hedge funds will have to respond to market uncertainty following the vote for Brexit. If performance can be sustained in challenging economic conditions, then fund managers will go a long way to restoring the green shoots of investor confidence that have been nurtured over the past four months.” 

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