Last year was a good one for hedge funds – they finished up 2.42% globally, beating equities and bonds on an absolute and risk adjusted basis.
“While 2015 will not be remembered as a vintage year for the industry, the majority of hedge funds still produced positive returns amid challenging market conditions, beating stocks and bonds on both an absolute and risk-adjusted basis and preserving capital for pension funds and other investors,” said Jack Inglis, CEO of the Alternative Investment Management Association [AIMA], the global representative body for alternative asset managers. “Given that this period of market volatility is set to continue during 2016, we remain confident that hedge funds will continue to meet their investors’ expectations for competitive, diversified and low-volatility returns.”
AIMA said the analysis, based on returns reported to Hedge Fund Intelligence by funds with total assets under management of roughly $1.1 trillion, represented one of the most comprehensive assessments of the global hedge fund industry’s performance last year.
It was an especially good year for Canadian hedge funds, as the asset-weighted Scotiabank
Canadian Hedge Fund Index found hedge funds returned an average of 6.21% last year, while the broader S&P/TSX Composite Index fell 11.09% during the same period.
This was a huge contrast to American hedge funds, where the HFRI Fund Weighted Composite Index, which tracks hedge fund performance, closed down 0.85% in 2015, marking only the fourth time since 1990 that the index recorded a loss.
However, in terms of AUM, the Canadian hedge fund industry is a drop in the bucket compared to the US. Canadian hedge funds have approximately $35 billion in total AUM, whereas a single fund in the US – the Bridgewater Associates Pure Alpha II Fund – has about US$81 billion in AUM. According to AIMA, Canada’s $35 billion AUM is divided up among approximately 140 hedge fund managers, and 58% of Canadian hedge funds have AUM of less than $100 million.
AIMA research also found that hedge funds, on average, outperformed stocks and bonds on both a headline and risk-adjusted basis. Around two-thirds of funds (65.3%) reported positive returns; the best-performing strategies were equity market neutral/quant (up 10.44%), long/short equity (up 6.79%) and multi-strategy (up 5.65%).