Preqin Reviews Q3 Alternative Fund Performance and Trends

Preqin Reviews Q3 Alternative Fund Performance and Trends 2

The third quarter of 2015 was a difficult one for most investments, and hedge funds were no exception. In the aggregate, hedge funds lost 4.08% for the period, according to the Q3 2015 Preqin Quarterly Update, marking their worst quarter since Q3 2011. Nevertheless, interest in alternative strategies has continued to mount, and Preqin notes that liquid alternatives are seeing particularly strong growth in new fund launches.

Q3 Returns by Structure and Strategy

Preqin breaks down Q3 hedge-fund industry returns by structure and strategy. While single-manager hedge funds lost 4.08% for the three months ending September 30, funds-of-hedge-funds lost only 3.08%. European UCITS hedge funds lost 3.72%, but global CTAs (“commodity trading advisors”) were able to eke out meager gains of 0.24% – not bad, considering the S&P 500’s Q3 returns of -6.94%.

Net Returns of Hedge Funds by Structure Q3 2015

Relative value hedge funds barely edged out CTAs with Q3 returns of +0.26%, making relative value the quarter’s top-performing strategy. All other hedge-fund strategies lost ground, with equity strategies faring worst at -6.73%. In Q2 2015, only macro strategies and CTAs posted negative returns, while equity, relative value, event-driven strategies were all in the black, and multi-strategy funds were even.

Net Returns of Hedge Funds by Strategy Q3 2015

New Fund Launches

Alternative mutual funds accounted for 13% of all alternative fund launches in Q3 2015, up from just 3% of all launches in the prior quarter. Their European equivalents also accounted for 13% of all fund alternative fund launches in Q3, up from 9% in Q2.

Breakdown of Hedge Fund Launches in Q3 2015 by Structure

There was a major increase in the proportion of new macro-strategy fund launches, with funds pursuing macro strategies accounting for 30% of all new fund launches, up from just 14% the prior quarter. Equity, credit, and relative value strategies each saw their share of fund launches decrease, while the share of multi-strategy and event-driven funds increased.

Breakdown of Hedge Fund Launches by Core Strategy Q4 2014 - Q3 2015

Hedge Funds by Geographic Focus

Hedge funds with a focus on developed markets outperformed other categories in Q3, even though they posted losses of 0.48% in the aggregate. Asia-Pacific funds fared worst, returning -6.28%, while emerging markets and North America logged respective losses of 4.86% and 4.60%. European-focused funds fell 1.35% for the period.

Cumulative Net Returns of Hedge Funds by Geographic Focus Q3 2015

As a result, it’s not that surprising that the share of Asia-Pacific fund launches fell from 13% in Q2 to 9% in Q3. Emerging markets- and European-focused funds saw their share of new launches increase, while North America-focused launches held steady, and globally-focused fund launches fell.

Breakdown of Hedge Fund Launches by Geographic Focus Q4 2014 - Q3 2015

Largest Managers

Preqin’s white paper also includes tables listing the aggregate returns of alternative funds across more than 40 categories, with data for July, August, September, Q3 as a whole, and three-year annualized returns. A second set of tables ranks the top 20 hedge fund managers by assets under management (“AUM”) and the top 20 fund-of-hedge-fund managers by AUM. I’ve included the top five from each group below:

Top Five Hedge Fund Managers by AUM:

  1. Bridgewater Associates ($168.8 billion)
  2. AQR Capital Management ($71.2 billion)
  3. Man Investments ($52.2 billion)
  4. Och-Ziff Capital Management ($46.8 billion as of July 1)
  5. Standard Life Manaemetn ($39.4 billion)

Top Five Fund-of-Hedge Fund Managers by AUM:

  1. Blackstone Alternative Asset Management ($68 billion)
  2. UBS Hedge Fund Solutions ($34.5 billion)
  3. Goldman Sachs Asset Management ($29.2 billion)
  4. Grosvenor Capital Management ($27.4 billion)
  5. HSBC Alternative Investments ($27.2 billion)

All AUM data as of June 30, 2015, unless otherwise noted.

For more information, download a pdf copy of the white paper.

Past performance does not necessarily predict future results.

Add a Comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.