Long/short equity mutual funds bounced strongly in October. Not only did the category post a 2.88% gain in the aggregate, according to Morningstar – recovering from the prior month’s 1.78% losses – but the two worst-performing long/short equity funds in September were the category’s two best performers in October.
Top Performers in October
The three best-performing long/short equity mutual funds in October were:
The Catalyst and Tealeaf funds returned +10.71% and +9.05%, respectively, outpacing the #3 fund’s +8.73% for the month. But while the Giralda fund posted gains for the first 10 months of 2015, STVIX and LEFIX were both in the red for the longer-term period. Indeed, STVIX and LEFIX were September’s worst performers.
STVIX’s 10.71% gains in October don’t quite make up for its 11.12% losses in September. The fund, which debuted in 2010 and recently had just $7.8 million in assets under management (“AUM”), lost 15.13% of its value in the first 10 months of 2015, and was down a painful 18.66% for the three months ending October 31 – despite October’s big gains.
Similarly, LEFIX’s 9.05% October gains weren’t enough to make up for its 10.72% September losses. Where the fund differs from STVIX is in its one-year returns through October 31: STVIX lost 18.26% for the period, while LEFIX gained 3.43%. LEFIX launched in 2013 and recently had $2.5 million in AUM.
Finally, the Giralda Manager Fund, which gained 8.73% in October, rounded out the long/short equity category’s top three for the month. With around $190 million in AUM, the fund is much larger than its counterparts, and its long-term track record is much stronger: GDAMX debuted in 2011 and had three-year annualized returns of +12.59% through October 31.
Worst Performers in October
The three worst-performing long/short equity mutual funds in October were:
The CMG Tactical Futures Strategy Fund was the month’s worst performer, falling 6.74%. The fund is younger and much smaller than the others on this list, having debuted in 2012 and with only $7 million in AUM as of a recent filing. For the year ending October 31, the fund returned a devastating -25.72%. Its three-year annualized returns through that date stood at -10.43%.
Unlike the CMG fund, the Highland and Turner funds have much better longer-term returns, despite October’s poor performance. HHCAX lost 5.54% and TMSEX lost 4.99% in October, but the funds had respective three-year annualized returns of +13.59% and +11.67% for the period ending October 31. Both funds are rated “5-stars” by Morningstar, and had comparatively large AUM of $802.3 million (HHCAX) and $133.2 million (TMSEX), as of a recent filing.
September’s Best and Worst: Follow-Up
September’s top-performing long/short equity mutual funds included the LJM Preservation and Growth Fund (LJMIX), the AQR Long-Short Equity Fund (QLEIX), and the Longboard Long/Short Equity Fund (LONGX), with respective one-month gains of 5.25%, 3.98%, and 3.47%. In October, the funds returned -1.44%, +5.25%, and +2.54%, respectively.
The Catalyst Hedged Insider Buying and Tealeaf Long/Short Deep Value funds were September’s worst performers at -11.12% and -10.72%, respectively. They bounced back to be October’s best performers, as detailed earlier in the article. The third member of last month’s triumvirate, the Goldman Sachs Long Short Fund (GSLSX) – which lost 7.45% in September – returned -3.74% in October, continuing its underperformance.
Past performance does not necessarily predict future results.