The global hedge fund industry returned +1.75% in December, bringing aggregate 2019 full-year returns to +9.74%, according to the just-released eVestment December 2019 hedge fund performance data.
2019 marked the industry’s best aggregate returns since 2013, when the industry returned +12.58%. Performance is really only one measure of the health of the hedge fund industry, however, as many fund managers will have finished the year down, and performance will also vary from strategy to strategy.
Emerging markets hedge funds lead the way
For the year, Russia-, China- and Brazil-focused funds were performance leaders by a wide margin. Russia-focused funds returned +26.69% for 2019, China-focused funds returned +23.15% last year and Brazil-focused funds closed out 2019 at +21.68%.
However, where there is great reward, there can be great risk: All three of these fund categories were in the red in 2018. For Russia- and China-focused funds, the losses were substantial, with these funds returning -13.22% and -16.62% respectively in 2018.
Among primary strategies tracked by eVestment, Long/Short Equity funds were the big performance winners in 2019, returning +14.26% for the year. They were also near the top for monthly returns in December, bringing in +2.34%. This is quite a turnaround from the -7.01% Long/Short Equity funds returned in 2018.
Event Driven – Activist funds also were top performers among primary strategies last year, returning +2.85% in December and +13.24% for 2019. These funds were also in the red for 2018, returning -10.29% that year.
India-focused funds saw returns of +1.21% in December, but were negative at -2.34% for all of 2019. India-focused funds were the only type of hedge funds eVestment tracks that had negative full-year 2019 returns.
While full-year returns were almost universally positive for the year (except for India-focused funds – see above), some funds did have very weak, although positive, performance. For instance, Market Neutral Equity funds saw aggregate returns of +1.72% for 2019 and Distressed funds returned only +3.57% for the year.
So while hedge funds can play an important role in a balanced investment portfolio, eVestment’s year-end results show the importance of data and due diligence in selecting the types of funds in which to invest.