Preqin: All-Strategies Index Gains 4.06% in Q3/16, Up 5.41% YTD

Oct 17 2016 | 7:39pm ET

Despite stubbornly negative narratives about the hedge fund industry this year, the segment booked gains of 4.06% for the third quarter and is now showing a nearly-respectable 2016 YTD performance of 5.41%, according to industry data provider Preqin.  

Preqin’s All-Strategies Hedge Fund benchmark rose by 0.91% in September, marking the seventh consecutive month of positive performance. The quarterly gain of 4.06% marks an improvement from the first two quarters of the year, which returned +2.13% and -0.81%, respectively, and represents the best quarterly performance since Q1/13’s +4.10%. 

All leading hedge fund strategies are in the green through Q3, Preqin said in information provided to FINalternatives. Macro strategies represent the lowest gains (+1.94%) for the quarter, while equity strategies posted the highest (+5.18%). 

Event-driven strategies gained 4.59% in Q3, which brought 2016 YTD performance up to 7.90% - the best of any strategy. In contrast, relative value strategy funds are ahead 3.11% so far this year, the lowest of the group. Credit and macro strategies are the only leading ones to have posted gains in all three quarters through 2016, and have returned 5.85% and 5.27% YTD, respectively. 

Other key hedge fund performance facts from Preqin: 

  • Activists See Strong Q3: Activist funds generated robust returns of 5.49% in Q3, taking 2016 YTD performance to 5.95%. Volatility trading funds posted gains of 2.18% over the third quarter of 2016 and have added 6.74% through the year so far.
  • Performance by Region: North America-focused hedge funds delivered the highest returns of any region in Q3 (+5.14%). Emerging markets-focused funds have the best performance of any region in 2016 YTD, with returns of 8.87%; Europe-focused funds have posted 1.32% in 2016 YTD, the lowest of any region.
  • CTAs Falter: CTAs have failed to maintain the momentum they generated in the first half of 2016, and have posted overall losses of 1.82% in Q3. This sees 2016 YTD returns fall to 0.97%, and 12-month performance dip to 0.22%. 

  • Smallest Funds Make Gains: Emerging hedge funds, i.e. those with less than $100 million in AUM, saw the greatest returns of any size classification in Q3. They generated 4.27%, while large hedge funds saw the smallest gains (+2.94%). Across the year so far, emerging funds lead the way with returns of 6.04%, while large hedge funds have posted gains of 2.27%. 

  • Discretionary Funds Win Out: Although discretionary funds suffered losses in Q1 (-1.58%), returns of 4.52% in Q3 have taken 2016 YTD performance to 4.85%. In contrast, systematic funds posted far smaller gains of 1.65% through Q3, and their performance through the year so far stands at 3.81%. 

“Hedge funds have delivered consistent positive returns over the past seven months, marking the Preqin All-Strategies Hedge Fund benchmark’s longest successive run of monthly gains since 2012-2013,” said Amy Bensted, Preqin’s head of hedge fund products.

“In the current environment, in which an unprecedented 79% of investors said to Preqin in June that they were dissatisfied with the performance of their hedge fund portfolios over the past 12 months, fund managers and investors alike will welcome this run of solid returns,” she continued. “Within the universe of 22,810 funds open to investment, it has been the smallest funds – those with less than $100 million in assets – that have had the most success in 2016. With a large proportion of inflows over the last few years going to the largest managers, investors may look towards the smaller end of the spectrum in their search for returns.” 

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 40,000 professionals in 90 nations use the company’s products.  

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