These Were the Best-Performing Hedge Fund Strategies in 2020

Hedge funds focused on energy and basic materials stocks dominated, according to HFR.

Qilai Shen/Bloomberg

Qilai Shen/Bloomberg

In a volatile year featuring a historic stock rally, hedge fund strategies posted near-universal positive returns — but there was one obvious winner.

Equity hedge funds returned 17.49 percent in 2020, according to new data from research firm HFR. This puts stock fund managers well ahead of the larger hedge fund industry, with HFR’s fund-weighted composite index delivering an 11.61 percent return for the year.

Within the equities category, some strategies were stand-outs: Technology-focused hedge funds earned nearly 28 percent, while health care funds gained almost 26 percent. But the best performers in 2020 were hedge funds investing in the energy and basic materials sector. According to HFR, this strategy gained 33 percent in 2020.

The Standard & Poor’s 500 stock index, by comparison, gained 18.4 percent with dividends re-invested.

But not all equity hedge funds outperformed relative to the stock market. HFR’s fundamental value index ended the year up 14 percent, while the research firm’s quantitative index gained 15.32 percent.


The success of equity hedge funds focusing on sectors like energy, healthcare, or technology this year has been accompanied by a surge of new hedge funds targeting these strategies. According to a December report from hedge fund research firm PivotalPath, equity-sector hedge funds made up 45 percent of funds introduced during the first 11 months of 2020. These strategies had accounted for 32 percent of fund launches over the same period last year.

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Outside of equities, the highest-returning hedge fund strategies in 2020 were event-driven funds, which gained 9.3 percent for the year, according to HFR. Macro hedge funds returned 5.22 percent for the year, while HFR’s relative value index ended 2020 up 3.28 percent.

Highlights within these other categories included event-driven multistrategy funds, which rose 14.55 percent for the year, and fixed-income convertible arbitrage funds, which gained 12.05 percent.