Citi Reviews September Performance of Hedge Funds

Citi Reviews September Performance of Hedge FundsHedge funds lost ground again in September, adding to August’s losses. Of course, the Dow Jones Industrial Average and the S&P 500 Index each posted their biggest point gains of all time in October, so perhaps hedge funds bounced back along with the broad market in the most recently concluded month. But for September, Citi estimated aggregate hedge fund returns at -0.75% to -2.07%, bringing their year-to-date returns for the first nine months of 2015 to between -3.05% and +0.47%. These data and much more are included in the firm’s Hedge Fund Industry Snapshot for October 2015, which recaps the prior month.

Returns by Size

Among funds reporting both performance and assets under management (“AUM”), the monthly median performance for large funds – those with over $500 million in AUM; was substantially better than the performance of small funds – those with less than $100 million in AUM. Large funds lost just 0.17% for the month, while small funds fell by 0.83%. Midsize funds, with AUM between $100 million and $500 million, lost 0.60%.

Small hedge funds significantly outperformed the MSCI World, MSCI Emerging Markets, and S&P 500 indices in September, which posted respective losses of 3.6%, 3.0%, and 2.5%. Even the worst performing hedge-fund strategies fared much better than cap-weighted, broad-market indices for the month.

Returns by Strategy

CTA/managed futures and multi-strategy funds each posted aggregate gains for September, but they were the only strategies to do so. The former posted significantly bullish returns of +1.51%, while the latter eked out a tiny 0.2% gain.

The worst-performing strategy for September was surprisingly Dedicated Short, which fell by 1.62%. Event-driven, emerging markets, and equity long/short strategies also suffered significant losses, falling 1.56%, 1.45%, and 1.33%, respectively, according to Citi.

The image below breaks down monthly performance by strategy and shows the dispersion between the top and bottom funds in each category:

Hedge Fund Performance by Strategy - Monthly Dispersion September 2015

Asset Flows

For just the third time in 2015, investors withdrew more cash from hedge funds than they invested, leading to net outflows of a whopping $8.1 billion. Combined with capital losses of $10.1 billion, hedge fund assets declined by a staggering $18.2 billion in September 2015.

Composition of Change in Assets - September 2015

Other Highlights

Some other highlights from Citi’s report:

  • Hedge funds levered up in September, increasing gross leverage to 2.63x from 2.57x in August;
  • Global macro and market neutral funds carry the most leverage, on average, at 4.4x and 4.3x, respectively;
  • Information-technology and consumer-discretionary stocks remain hedge funds’ favorite short sales; and
  • Equity long/short funds remain most popular in terms of both AUM (27.2% of all hedge-fund AUM) and number of funds (33.9%).

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