eVestment: Activist, Distressed Strategies Lead Returns For Second Straight Month

Sep 9 2016 | 11:04pm ET

Discretionary strategies produced the best returns in the hedge fund space for the second consecutive month in August, according to eVestment’s latest Hedge Fund Performance Report. The company’s Hedge Fund Aggregate gained 0.18%, bringing overall YTD returns to +3.47%.

Unlike July, which saw broad gains across the spectrum, just 56% of the industry produced gains in August, eVestment said. Distressed strategies were among the strongest performers in August, at +2.18%, bringing YTD performance for the strategy to +8.06%, while activist strategies gained +1.95% to push YTD performance to +6.56%. 

On the other hand, August was not nearly as kind to macro and managed futures funds, eVestment said. The vast majority of funds in both groups declined in August, leaving both lagging most of their hedge fund peers so far this year and having the highest concentrations of losses.

Key points in eVestment’s August report:

  • From a strategy perspective, distressed managers have emerged as industry leaders, benefiting from the rebound within energy sector credits, and emerging market hedge funds have been riding country specific exposures of Brazil and Russia for elevated returns. 
  • Commodity funds posted their fourth monthly decline of 2016, falling -1.12%. 

  • Distressed funds experienced their fourth >2% monthly return of 2016. 
The uniformity of returns within the distressed segment this year is further evidence of the concentration of positions, and resulting gains, in energy sector credits.
  • Two months removed from their post-BREXIT superb returns, managed futures funds were negative for the fourth time in six months.
  • Investors’ allocation and redemption decisions have likely not met expectations in 2016. Event driven funds had more money removed in both 2015 and 2016 than any other primary strategy. In 2016, the group has produced leading returns, 85% of managers are producing positive returns, and those with gains have returned an average of +8.12%.
  • Managed futures funds have received more new assets in 2016 than any other primary strategy, $16.2 billion through July. However, four monthly losses in 2016, including a streak of three prior to the huge gains in June, have begun to impact flows.
  • Brazil-focused managers remain on pace for their best year on record since 2009, and third best since 1999.
  • Funds investing in developed European markets have suffered in 2016, primarily due to losses early in the year and in June in the wake of the Brexit vote. Near flat returns in August, a month in which both European equities and credit markets were generally positive, illustrates the divergent positioning within the universe.
  • Funds investing in Russia continued to perform well in August. The universe still lags Brazil-focused funds in 2016, but have outperformed all emerging markets over the combined 2015/2016 period. Russia-focused funds have shown a history of either leading, or trailing all other segments of the industry. 

Atlanta-based eVestment was founded in 2000 by Jim Minnick, Matt Crisp and Heath Wilson. The company boasts one of the largest, most comprehensive global databases of traditional and alternative strategies and provides institutional investment data intelligence and analytic solutions to clients worldwide.

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