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Hedge fund performance picks in 2Q, with Event Driven-Activist funds dominating

Monday, July 13, 2020
Opalesque Industry Update - Hedge funds gained an average of +2.07% in June, but year-to-date (YTD) average industry returns are still in the red at -3.37%. The second quarter was stronger for the industry, with 2Q 2020 average returns at +9.91%.

Roughly 40% of the industry is producing positive results in 2020, with the average positive gain among that group of +9.12%. The average decline of those funds in the red is -10.85%.

Among primary strategies eVestment tracks, a strong story is developing with Event Driven - Activist funds. Average positive returns among this group of funds stood at +4.71% in June and caps off a strong three months of performance that has these funds with an average performance of +22.58% for Q2 2020. Event Driven - Activist Funds are still in the red YTD at -6.44% following a volatile first quarter.

Hedge funds focused on India and China performed well in June, at +8.92% and +7.36%, respectively. India funds are still digging out from a tough first quarter, with YTD returns standing at -12.48%, while China-focused funds are in the green YTD at +8.34%. Brazil-focused funds are also in the green with average returns of +5.89% in June, but are digging out from an even bigger hole than India-focused funds YTD, with results for the year at -24.12% for Brazil-focused funds.

Size has not proven to be an advantage for hedge funds so far this year. The 10 largest funds reporting to eVestment had an average return in June that was significantly below the industry average for the month (-0.70% vs. +2.07%), and YTD returns for the group also lag the broad industry (-5.75% vs. -3.37%).

From these largest managers, there is a wide dispersion of returns. Seven are down an average of -14.03% for the year, while the three that are positive are each up over 6%, with two producing noticeably outsized gains. Given the size of these products, a broad swath of investors are likely feeling dissatisfied with their hedge fund allocations this year.

Among the primary strategies eVestment tracks, Managed Futures funds were the only ones in the red for the month, with average performance of -0.26%. These funds are also in negative territory YTD, but just barely at -1.58%.

Most of the fund types eVestment tracks saw positive average returns in June and for Q2 2020, but are still in negative territory for average returns YTD. The performance numbers so far this year show an industry that was thrown off base just as badly as the rest of the world by the COVID-19 pandemic at the beginning of the year, but that seems to be gaining traction and re-establishing its footing as the world, and investment professionals, adjust to the new normal.

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