Linear Investments provides a summative overview on the performance of Hedge Funds in October and the first three quarters of 2019.
Hedge Funds posted the best performance this year since 2013.
According to Bloomberg hedge funds are gaining momentum, surpassing uncertainties in markets and geo-politics having gained 4.9% on average in the first three quarters of 2019. Eurekahedge Hedge Fund index similarly returned 5.7% over the same timeline with nearly 30% of the managers within the index having recorded double digit returns.
As at the end of September, Eurekahedge reported that assets under management within the hedge fund industry stood at US$2.27trillion, illustrating a performance growth of US$98.3 billion year-to-date. Leading performance for the year within the Eurekahedge Index were Global Macro and Equity Long/Short strategies, while geographically Latin America focused funds led returns. Bloomberg similarly highlighted equity strategies as leading in terms of gains, followed by event-driven strategies.
The growth has come despite a year of uncertainties roiling markets; Brexit, US-China trade war, impeachment inquiries to name but a few. Nevertheless, in the continuation of the longest bull-run in US history, hedge funds have continued to trail the S&P 500 which rallied 18.74% in the first three quarters of 2019. Whilst Eurkeahedge reports US$120.8bn in investor redemptions from hedge funds over the year, it also shows redemptions slowing with net outflows in Q3 reported as US$34.3bn versus Q1 US$46.4bn. Now in the final quarter of 2019, the challenging geo-political backdrop remains in addition to relatively unchartered monetary policy regimes and a slowing global economy.
Aranca Research Group cites that the top challenges in the hedge fund community include growing AUM, fee pressures and keeping up with regulatory change.
However, funds that are already performing well are expected to continue to capture institutional investment. This growth will be further driven by HNWIs in emerging markets. As we look to the year ahead, it will be up to investors to navigate these nuances to ensure the best returns.
Linear has always held the stance that as volatility returns to the market the Alternative area will start to strengthen in risk return patterns and become more attractive than when the market is totally directional.