Hedge fund returns hit a three-year high last year despite a difficult start, figures showed.
There have been differing reports of hedge fund assets at the start of the year, but Preqin’s All Strategies Hedge Fund benchmark posted returns of 7.4% last year, more than triple the gains made in 2015.
Event-driven strategy funds enjoyed gains of 12.5% in 2016, a complete reversal of fortunes compared to the previous year when it was the only hedge fund strategy that saw losses.
According to Preqin, smaller funds posted higher gains. Emerging market and smaller hedge funds saw gains of 8.18% and 6.4%, respectively, which compares to medium and large funds’ gains of 5.53% and 4.63%.
North American focused funds outperformed their European counterparts considerably, returning 10.2% compared to Europe’s 2.89%.
However, in another reversal of trends, commodity trading advisor funds started last year strongly but faltered as 2016 went on. Although posting better returns than 2015 – 0.91% compared to 0.15% – it was a long way from the double-digit returns these funds enjoyed in 2014.
Amy Bensted, head of hedge fund products at Preqin, noted that while hedge fund managers saw a marked improvement in performance last year, their products were still not making gains in line with other alternative asset classes.
“This is especially pertinent in the wake of some high profile investors announcing the reduction or elimination of hedge fund investments from their portfolio,” said Bensted.
Just last year, the $7.7-billion (€7.2 billion) Rhode Island pension fund announced it was offloading $500 billion in hedge fund assets.
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