Preqin: Strong Q2/16 Performance Drives Hedge Fund Industry in First Half

Jul 15 2016 | 9:32pm ET

A new research report from Preqin reveals hedge funds posted positive results in the first half of 2016 despite a very rocky start to the year, although the performance was still the lowest first-half return for the industry since 2008. 

All leading strategies posted positive performance through the first half, with macro and credit strategies recording the highest returns, Preqin’s research shows. The company’s All-Strategies Hedge Fund benchmark gained 0.15% in June, despite global market turbulence leading up to and following the Brexit vote, and 2.15% for the second quarter. For the first half, the measure posted overall gains of 1.36%. 

While positive and a far cry from the carnage witnessed in the first months of the year, the gain represents the lowest first-half performance for the hedge fund industry since 2008, when funds saw losses of 0.53%, Preqin said. 

Macro strategies outperformed all other leading hedge fund strategies in H1, gaining 3.18%, while credit strategies gained 2.53%. Event driven strategies experienced the worst performance in June, -0.50%, yet are still posting gains of 1.74% through H1.

Other Hedge Fund Performance Facts: 

  • UK-Based Funds Suffer: After four consecutive months of positive performance, the GBP benchmark returned -0.89% in June, while the EUR benchmark also suffered losses of -0.55%. Hedge funds based in the UK recorded negative returns of 0.64% through June, with H1 2016 performance standing at -1.13%. 

  • CTAs posted robust returns of 3.27% through H1. January and February marked the first time since 2014 when CTAs saw two successive months of gains, noted Preqin. 
  • Emerging hedge funds recorded the best Q2 (+2.50%) and H1 (+1.89%) performance. Medium-sized funds saw the biggest losses in H1, down -0.70%. 

  • Volatility hedge funds recorded a fifth successive months of gains with returns of 0.07% in June, taking H1 performance to 2.18%. 
  • Mixed Picture for Liquid Alts: UCITS posted performance of -0.73% through June, ending H1 2016 with overall losses of -1.73%. In contrast, alternative mutual funds returned 0.40% in June, driving quarterly gains of 1.53%, and H1 performance of 1.27%.

“It has been a mixed picture for hedge funds in the first half of 2016,” said Amy Bensted, Preqin’s head of hedge fund products. “Suppressed commodity prices and turbulence in global markets led to a difficult environment in January and February. 

“Since then, however, the industry has rallied, with all leading strategies, liquid alternatives and CTAs posting gains through the second quarter,” she added.

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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