December Hedge Fund Results Are In

Hedge funds gained 1.01 percent in December, taking the 2016 returns to 4.48 percent, according to data provided by Eurekahedge. The MSCI AC World Index (Local), which represents underlying markets, gained 2.38 percent in December, with the 2016 returns coming in at 7.37 percent. Almost 19.7 percent of the hedge funds recorded double-digit returns in 2016, up from 17.6 percent in 2015.

The Trump Impact

Buoyed by Donald Trump’s victory in the U.S. presidential election, the North American equity markets rose in December, with the S&P 500 gaining 1.82 percent and the Dow Jones Industrial Average up 3.34 percent.

The European Central Bank and Bank of Japan kept their policies unchanged, which supported the performance of underlying equity markets. “Ongoing political and economic events hold much uncertainty in store for 2017, and it remains to be seen how long markets will continue to sing to the tune of Trump's rhetoric once he takes office later this month,” the Eurekahedge report explained.

Highlights Of 2016

In 2016, assets under management contracted for the first time since 2008. The hedge fund industry shrank by $21.8 billion, with $43.4 billion in investor redemptions offsetting the $21.6 billion in manager performance-driven gains. In contract, the industry had grown by $108.7 billion in 2015, backed mainly by investor allocations of $80.7 billion.

• North American hedge funds grew 7.77 percent.
• Japanese hedge funds rose marginally by 0.32 percent.
• European hedge funds declined 0.12 percent.
• Emerging markets hedge funds gained 7.31 percent, with strength being driven by Latin America and Eastern Europe/Russia.
• Asia, ex-Japan, hedge funds posted their fifth straight month of decline, rising only 0.66 percent in 2016 as compared to 6.44 percent in 2015. The losses were led by Greater China, down 4.66 percent in 2016 versus a gain of 10.24 percent in 2015.

Eurekahedge Indices

• The Eurekahedge Frontier Markets Hedge Fund Index, representing frontier markets investing hedge funds, rose 10.76 percent.
• The Eurekahedge Long/Short Equities Hedge Fund Index gained 3.89 percent.