A look at Hedge Fund Returns over the last 12-months: NilssonHedge
NilssonHedge is xWIN’s Partner. Here is the great article I want to share.
https://nilssonhedge.com/2024/03/17/what-have-you-done-for-me-recently-a-look-at-hedge-fund-returns-over-the-last-12-months/
Summary and our understanding of this article
Over the past year, various hedge fund strategies, excluding cryptocurrencies, demonstrated stable performance. On average, certain strategies showed both good and poor outcomes.
- CTAs (strategies based on market trends) and event-driven strategies achieved an average return of 3%, which was lower compared to other strategies.
- Meanwhile, risk premia strategies, which aim for profit by taking risks, achieved a 5% return, and equity long-short strategies, which invest in stocks to balance profits and losses, achieved a 7% return.
- Asset allocation strategies (investing in stocks and bonds) performed well as the market recovered.
Interestingly, risk premia strategies were the least correlated with other strategies and markets over the last year, indicating they moved independently. On the other hand, cryptocurrency strategies showed little to no correlation with the stock market, which might be due to new ETF launches, among other factors.
CTAs, due to their longer-term investment in stocks, had relatively high correlations compared to other strategies and markets. However, there are various types of CTAs, each capturing different aspects of the market. For example, strategies focusing on large market movements struggled but still managed to generate small profits. Discretionary macro strategies and commodity strategies, in particular, faced difficulties.
Strategies related to stocks and options performed well, with about a 10% return, thanks to the relatively calm market conditions. However, previously successful energy traders did not perform as well.
In simple terms, the performance of hedge fund strategies over the past year was mixed, with some strategies achieving good results and others not so much. How risks were managed and the response to market movements significantly influenced the outcomes.
