Leading Hedge Fund Strategies Get In the Green YTD on Broad Strength in May

Jun 13 2016 | 11:45pm ET

The hedge fund industry has booked its longest stretch of positive performance in a year with a gain in May, according to new research from industry data provider Preqin. 

Preqin’s aggregate hedge fund industry performance benchmark returned 0.93% through the month, bringing year-to-date gains to 1.55%, according to a statement. Although lower than March and April gains of 2.39% and 1.42%, respectively, the May results bring all leading strategies into positive year-to-date performance for the first time this year. 

Other highlights from Preqin’s report:

  • Event driven strategies saw the strongest performance through the month, returning 1.59% to take 2016 YTD returns to 3.01% – the highest of any leading strategy – while equity strategies also posted robust gains of 1.18% for the month. 
  • Macro strategies were the only leading strategy to record losses in May, returning -0.11%. 
  • Following three months in which they produced the highest returns of any size classification, emerging hedge funds saw the lowest returns of any size in May, with gains of 0.65%. By contrast, large hedge funds had their highest performance month of 2016, making gains of 1.19%. However, this does not reverse the overall trend seen in the preceding months, and emerging hedge funds still have the highest YTD returns (+1.80%), while large hedge funds are the only size classification still facing losses, with returns of -0.16% for the year so far. 
  • Discretionary Funds Win Out: Discretionary funds posted gains of 1.29% in May, outperforming systematic funds (+0.53%) for a third consecutive month. Both trading styles are seeing gains through 2016 YTD, with discretionary funds returning 1.17% and systematic performance at 1.02%. 

  • Liquid Alts Neutral: Alternative mutual funds saw a month of near-neutral returns, posting 0.08% through May and 0.58% so far this year. UCITS also saw small gains of 0.21%, with the fund type still returning negative performance of -1.35% for 2016 YTD. 

  • CTAs Suffer Losses: The fluctuating performance of CTAs took a downward turn in May, suffering losses of 0.98%. Although 2016 YTD shows gains of 0.68%, CTAs have only recorded two consecutive months of positive returns once since the start of 2015. 

  • North America Ahead: Hedge funds focused on North America saw the largest gains in May, returning 1.38%, with the region also seeing the best performance through 2016 YTD (+2.40%). 
  • Although they recorded positive performance for the month, Asia-Pacific- and Europe-focused funds are still showing losses of 0.81% and 1.68% respectively for the year so far. 

“Most trading methodologies and strategies are showing gains in 2016 YTD, despite negative performance at the start of the year, and hedge funds can look forward to the coming months with optimism,” said Amy Bensted, head of hedge fund products for Preqin, in the statement. “Although macro-events such as the Brexit referendum and U.S. election are making for choppy global markets, the industry has begun to show again its ability to provide non-correlated, risk-adjusted returns in challenging financial conditions. 

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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