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.”