The latest report on hedge fund asset performance from industry data provider Preqin showed that hedge funds turned in the best performance since 2013. Preqin’s widely-followed All-Strategies Hedge Fund Index gained 0.68 percent in March 2017, building on the industry’s steady performance in the prior two months which saw returns of 1.01 percent and 1.46 percent in February and January respectively.
Event driven and equity strategies did particularly well last quarter, gaining 4.18 percent and 4.06 respectively. Overall, all leading hedge fund strategies posted positive returns across the first quarter, and only relative value funds saw their Q1 returns of 1.06 percent fail to match the asset class’ performance.
The Preqin All-Strategies Hedge Fund benchmark was above water in both January and February, and a return below 1 percent in March was sufficient to bring the benchmark into above 3 percent territory in Q1 2017, the best opening quarter performance since 2013.
Activist hedge funds, similarly, had a largely successful start to 2017, posting 3.30 percent over the last three months of the year. In addition, other hedge fund strategies that struggled last year posted some significant gains; for instance, funds of hedge funds that lost over 0.35 percent in 2016 added returns of 2.20 percent in Q1 2017.
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Other key performance facts
However, amid the overall positive performance in the hedge fund sector, there were some dark spots. Notably, CTAs’ losses of -0.18 percent in March contributed to Q1 returns of -0.36 percent which weakens the value of these products in terms of non-correlated returns and downside protection.
The first quarter proved a turning point for certain segments across the hedge fund industry with Asia-Pacific-focused funds gaining 4.82 percent in Q1 2017 while emerging markets-focused hedge funds returned 3.82 percent.
As we move into Q2 2017, participants in the hedge fund industry will be waiting to see whether the change in the first three months continues into the rest of the year, particularly for hedge funds larger than $1 billion which posted the highest gains of any size classification in Q1 (+3.98 percent). Also, emerging- (+3.27 percent), small- (+2.55 percent) and medium-sized (+2.91 percent) hedge funds all recorded positive performance.
Amy Bensted, Head of Hedge Fund Products, commented: “Performance concerns within the hedge fund industry and anxieties surrounding wider economic uncertainty have troubled investors in the asset class over the past year. However, hedge fund managers have delivered strong returns over this period, posting gains in 11 of the past 12 months and recording their strongest opening quarter to a year since 2013.”
“Hedge funds across all leading strategies, geographies and size classifications have shared in this positive start to 2017; this strong performance across the board is crucial at a time when investor scrutiny is intense. The key to attracting investor capital back into the industry over the remaining three quarters in the year is likely to be maintaining these returns and dealing with concerns over fees, but hedge fund managers will now be able to point to the strength of recent performance as an incentive for investors,” she added.