Hedge Funds Set to Double 2012 Returns

May 7, 2013 (PLANSPONSOR.com) - Hedge funds returned an average of 1.04% in April and 4.6% through the first four months of 2013, according to eVestment.

On an annualized basis, 2013 performance is on pace to more than double the industry’s returns in 2012, the firm said in its April hedge fund performance report.   

The sharp price declines from gold and silver mid-month may have hurt funds with dedicated precious metals exposure, but outside of a select group of funds, the commodities’ sell-off was not a meaningful event across the industry. Commodity strategies again illustrated the group’s aggregate long-bias toward commodity prices. These strategies posted another negative month and remain the only segment of the industry in negative territory in 2013; -0.85% in April and -2.28% YTD.   

Long/short equity focused funds are on pace to return over 20% in 2013 after another positive month lifted returns over 6% through the first four months. If returns can continue at this pace long/short equity funds have a chance to produce their best returns in more than a decade.   

However, given this exceptional performance from directional equity strategies, it is of interest that long/short equity funds had the highest net investor outflows in 2012 and have continued to see outflows into 2013.

Credit strategies were modestly higher in April and on pace to match 2012 performance. Returns from the universe continue to be dominated by exposure to securitized products. Asset-backed securities and mortgage-backed securities focused funds earned 1% and 1.20%, respectively, in April, and 8.9% and 5.1% in the first four months of 2013.   

Managed futures funds’ 1.02% return for the month brought their aggregate returns for 2013 into positive territory. Four of the top five early reporting funds were managed futures strategies and all reported double-digit gains in April, most likely benefitting from gold’s sharp decline.   

Exposure to Japan’s monetary policy-driven equity market boom has produced once-in-a-generation hedge fund performance. The group of Japan-focused funds are up nearly 20% through April, on pace for returns over 70% in 2013.   

In other regional markets, China funds rebounded over 2% in April and emerging Europe focused funds declined nearly 2%, though the latter has returned more than double the former in the first four months of 2013.  

More information about eVestment is at www.evestment.com.