Hedge Fund Investors Who Pulled Their Money May Have Jumped the Gun as Funds See Strong July

In June, hedge fund investors pulled $20.7 billion from hedge funds, one of the largest drawdowns in years. But that may have been premature as hedge funds saw performance rebound in July, with aggregate performance hitting +1.89% in July and +3.29% year-to-date, according to the just-released July 2016 eVestment Hedge Fund Performance Report. Of particular note, according to the report, was performance of event driven, activist and distressed funds, as well as funds focused on Brazil and China.

Some interesting points from the report, according to author Peter Laurelli, eVestment’s vice president and global head of research, include:

· In 2016, event driven funds have had more money removed than any strategy following less than stellar returns in 2015. But for investors who remained, or those who focused on smaller managers, 2016 has been a much better year, with the broad event driven universe gaining an average of +1.96% in July and +3.84% YTD. Funds with under $1bb in AUM are at +4.57% YTD.

· Activist managers, a subset of event driven, have generally done very well this year, despite select high profile outliers. Activist strategies were at +3.82% in July and with YTD returns averaging +5.04%, are among industry leaders in 2016.

· Distressed hedge funds produced another strong month in July, returning +2.89%, which brings YTD returns to +6.26%, the highest among any primary strategy.

· As athletes and spectators enjoy the Rio Olympics, Brazil-focused hedge fund managers are likely also celebrating as they are on pace for their best year since 1999, with July returns at +4.93% and YTD returns at +30.61%. Gains thus far from 2016 have a long way to go to recapture losses from the prior three years, however.

· China funds, which are still experiencing redemption pressures, albeit to a lesser degree each of the last three months, experienced a much needed rebound in July, returning +3.10%. The universe remains negative for the year.

· Overall, hedge funds produced their most broadly positive month since February 2014, with 79% of all funds posting gains. Several strategies had zero constituents declining in July, and only one segment had fewer than half of its funds produce gains.

To download a full copy of the report, please click here.