Hedge funds posted gains in April, with aggregate returns ranging from +0.41% to +0.93%, according to two different measures used in Citi Prime Finance’s Hedge Fund Industry Snapshot for May 2016. But year-to-date through April 30, only one of Citi’s aggregate measures had pulled out of the red, and total returns ranged from -1.47% on the low end to +0.27% on the high. Thus, investors withdrew assets from hedge funds in April, despite the aggregates posting their second straight month of gains.
AUM and Flows
Global hedge fund assets rose by $4.9 billion in April, but the gains were driven by performance, not asset flows. Investors withdrew $1.9 billion from hedge funds in April, making it the third month of negative flows in the past four. Through the end of April, total investor outflows stood at $23.6 billion, compared to inflows of $41.6 billion at the same point in 2015. As of April 30, total hedge fund assets under management (“AUM”) stood at $2.9 trillion.
The best-performing strategies in April were fixed-income arbitrage, event driven, and equity long/short, which posted average returns of +2.16%, +1.02%, and +0.99%, respectively. The worst performers were global macro-focused funds, which lost 0.3% for the month.
Single-manager funds with more than $750 million AUM returned +0.66% in April, and funds with less than $350 million returned +0.52%. Mid-sized funds with between $350 million and $750 million AUM were the top performers at +0.74%.
Leverage and Shorting
Hedge funds did some moderate de-leveraging in April, reducing overall leverage used to 2.69 times assets from 2.72 times in March. The strategies that were using the most leverage as of April 30 were multi-strategy (4.4 times AUM), market neutral (4.0 times), and global macro (3.58 times).
Information technology and consumer discretionary stocks continued to dominate short activity. Combined, the two sectors accounted for 36.25% of short execution and 36.44% of short covers in February. Short-selling data is delayed three months.
Hedge Funds vs. Other Assets
The two different aggregate measures of hedge fund performance that Citi uses are the HFR Equal Weight and the HFRX, which returned +0.93% and +0.41%, respectively, in April. The S&P 500 returned +0.4%, by contrast, while the MSCI World and Emerging Market indices posted respective returns of +1.6% and +0.6%. Commodities, as measured by the S&P GSCI, returned a whopping +10.1%, and the U.S. Dollar lost 1.6%.
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Past performance does not necessarily predict future results.
Jason Seagraves contributed to this story.