Mixed Results for Hedge Funds at Mid-Year

Half of returns are positive, half negative, for an overall uninspiring performance.

It’s a best-of-times/worst-of-times scenario for hedge funds at 2018’s midpoint, according to eVestment researchers.

Only slightly more than half of strategies are positive through June, up an average 5.3%. But in a nod to Charles Dickens, negative performers are down an identical amount. Overall, the firm’s hedge fund aggregate was up just 0.16%, compared to 2.65% for the S&P 500 over the six-month period.

“In many cases, what had been doing well in 2017 has underperformed in 2018,” and vice-versa, the firm wrote in a report. While cautioning the investors shouldn’t let short-term results sway them, it added: “This is not a situation which inspires confidence.”

Look at long/short funds, a large category. For last year, it beat out every other category, with a 12.13% return. But for this year’s first half, it only managed 1.48%. No doubt, 2017’s strong stock market—versus the late January 2018 correction, followed by lackluster performance since—explains the difference.

Event-driven funds, though, had a reversal of fortune.  As mergers picked up in tempo this year, the strategy has flagged with an increase of just 2.41%, while last year rising 7.47%.

One paradox: Macro funds, which make big bets based on macroeconomic trends, also didn’t cover itself with glory in the past six months, with a loss of 0.73% (it was up 3.39% in 2017). Oddly, eVestment found, investment flows into macro have remained strong. Perhaps they think macro will be a good vehicle during a global trade war and other disruptions.


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