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Hedge funds end tumultuous year on a high note; China, technology and activist funds among top performers

Wednesday, January 13, 2021
Opalesque Industry Update - The global hedge fund business ended 2020 on a high note, with average hedge fund returns for December coming in at +4.00% and bringing full-year 2020 average returns to +11.02%, according to the just-released eVestment December / 2020 hedge fund performance data. The hedge fund business' 2020 average performance outpaces hedge funds' 2019 average performance of +10.07% and is the highest annual average performance since 2009, when the business had an average return of +19.44%.

"Despite the high average returns across the industry, 2020 was a year where the dispersion of returns between fund types and within those various segments was significant," said eVestment Global Head of Research Peter Laurelli. "For instance, this was very apparent among large funds."

Laurelli notes that the 10 largest hedge funds reporting to eVestment produced average gains of only +3.72% in 2020, almost three times below the industry average. "But that figure does not at all represent the returns generally produced by the group," he said. "Despite an average return near 4%, only one fund within the 10 largest was close to that average. There were more large funds with double-digit gains and double-digit losses than not in 2020, highlighting the importance of fund due diligence and monitoring when selecting any hedge fund."

Some other interesting points from the new data include:

China-focused hedge funds were the big performance winners in 2020, returning an average of +31.42% for the year, with returns of +3.94% for December. India-focused hedge funds also ended the year strong, at +20.45%, with December returns coming in at +8.76%. Among the country-exposed funds eVestment tracks, only Brazil funds ended 2020 in the red, with annual average returns of -10.57%.

Equity-focused funds were big performance winners in 2020, with average annual returns at +14.85%. Among Equity fund sub-sectors, those focusing on Technology and Energy were big performance winners, with annual average returns at +29.45% and +26.75% respectively. Among the equity fund sub-sectors eVestment tracks, only Financial equity funds came in negative for the year, though just barely with average performance for the year of -0.47%.

Among primary strategies eVestment tracks, Event Driven - Activist funds had the strongest December performance, with average returns coming in at +6.23%, bringing 2020 average returns to +17.82%. Origination & Financing funds, with full-year 2020 returns of +19.36%, were the only primary strategy eVestment tracks to beat Event Driven - Activist funds in full-year average returns.

Among primary strategies eVestment tracks, several others also turned in double-digit full year 2020 average returns: Long/Short Equity funds at +14.95% for the year, Convertible Arbitrage funds at +14.19% for the year and Multi-Strategy funds at +10.18% for 2020.

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