Is 2019 the year hedge fund firms come back into vogue? If hedge fund firm return data from January is any indication, the answer could be yes.
New data from eVestment, an asset management analytics firm, show that hedge funds managed to reverse a five-month-long losing streak in January — and posted their best single-month return in nearly ten years.
On average, hedge funds returned 3.91 percent during the month, according to eVestment. This not only broke the trend of hedge funds losing money for five months straight, but it was also the largest gain for the industry since May 2009, when hedge funds returned 5.14 percent on average, the data show.
According to Peter Laurelli, the global head of research at eVestment, hedge fund firm performance was helped by the strong gains in equity markets during January. Hedge funds with the highest exposure to equities tended to perform better, Laurelli said by phone Friday.
Laurelli said that 2018 was difficult for many fund managers in terms of performance, but a handful stood apart from the pack, particularly those with “a distinct point of view,” he said.
Equity-focusedhedge funds were, not surprisingly, among the best performers during January, with the broader equity category returning 5.44 percent during the month, according to eVestment’s data. Those same funds lost 7.53 percent during 2018, the data tracker found.
Long-short equity funds gained 5.97 percent during January. This strategy also finished 2018 in the red, losing 6.96 percent during the year, per eVestment.
Laurelli said he expects that 2019 will be similar to 2018 in that a separation between out-performers and under-performers will be clear.
Funds invested in Brazil, Russia, and China also did well during the month, the data showed. Those focused on Brazil returned 10.7 percent on average, while those focused on China netted 7.07 percent. Russia-focused funds returned 6.44 percent, according to eVestment.
According to Laurelli, these markets are sensitive to the performance of the dollar. Because of its recent weakness, he said, these funds were able to produce stronger performance.
[II Deep Dive: Fundraising Has Never Been Tougher for Hedge Funds]
Laurelli said he was particularly intrigued by the performance of managed futures last month. "That’s an area that has had recent difficulty,” he said.
That difficulty continued last month, as managed futures funds were one of the few strategies that lost capital during January. The strategy lost 0.87 percent during the month, eVestment found.
“Here we are starting a new year — one which has a meaningful, directional move — but for the most part, they were unable to take advantage of that,” Laurelli added.