Hedge funds end year with positive returns

In spite of difficult market conditions in the first six months of last year, average hedge fund returns ended 2016 in the black.

The HFRI Fund Weighted Composite index produced a 5.57% return in the 12 months ended Dec. 31, while the HFRI Asset Weighted Composite index came in at 2.96%. Index returns for 2016 were released Monday by Hedge Fund Research.

The HFRI Fund Weighted Composite’s 2016 return was well above the index’s 2015 return of -1.12% and the 2014 return of 2.98%, but lagged the 9.13% return in 2013.

All four major strategy components of the HFRI Fund Weighted Composite index also were positive in 2016, led by a 10.22% return of the HFRI Event-Driven (Total) category, followed by 7.82% for the HFRI Relative Value bucket; 5.54% for the HFRI Equity Hedge (Total) index; and 1.49% for the HFRI Macro (Total) index.

HFRI index returns for all substrategies in 2016 ranged from 18.71% for the HFRI Equity Hedge: Sector-Energy/Basic Materials to -1.06% for the HFRI Macro: Systematic Diversified index, the only negative return among all HFRI categories.

The HFRI Fund of Funds Composite index was barely positive at 0.48% for the 12 months ended Dec. 31, which bettered the index’s drop of 0.27% in 2015, but was well below 2014’s 3.37% return.

The HFRI Fund Weighted Composite index benefited in 2016, especially in December, from “post-election optimism and surging commodities,” said Kenneth J. Heinz, president of HFR, in a news release accompanying the year-end data.

“Following a disappointing decline in 2015, hedge fund performance in 2016 was the highest since 2013,” Mr. Heinz said, adding his prediction that “the recent post-election increase in investor risk tolerance is likely to drive continued performance and capital gains into mid-2017.”