Last year was the worst performing for the FoHF industry since 2011 and the third worst, on a median basis, since HFM InvestHedge began tracking the industry in 1998. The HFM InvestHedge Composite fell by 1.4% in December, its second greatest median loss of the year, to finish 2018 down by 3.5%.

The December loss concluded a challenging final quarter for the FoHF industry. The composite index was down in every month of the quarter, with the combined losses totalling -4.2% for the 3-month period, the worst quarterly loss since the index fell by 7.8% in the final quarter of 2008.

Only three peer groups finished the year on positive ground. The HFM InvestHedge Arbitrage Index was the strongest performer of 2018, with a 1.3% gain for the year. The index had only been negative once prior to October but was down in every month of the final quarter.

The leading performers in the group included Octogone Gestion’s Delphi Arbitrage Fund, up by 15.4% for the year, and the AlphaBee Asset Management Fund, which was up by 5.3%.

Commodities-focused FoHFs were the strongest performers in December, with a 2.7% gain that pushed the 2018 return for the HFM InvestHedge Commodities Index into positive territory, up by 0.4%.

The HFM InvestHedge Fixed Income Index suffered its worst loss of the year in December, with the 1.1% fall leaving the it up only a marginal 0.2% for 2018.

TriAlpha Enhanced Fixed Income Hedge Fund was the strongest performer in the peer group, with a 0.7% gain for the month and a 7.9% return for the year. EnTrustPermal Fixed Income Holdings was the weakest performer, and its 3.4% decline for December extended its 2018 loss to 9.4%.

US equity funds fell by 4.3% in December to finish Q4 down by 10%, its greatest quarterly loss since HFM InvestHedge began tracking the group. Every fund finished the month in negative territory, with losses that ranged from -1.4% to -10.8%.

Managed futures-focused FoHFs narrowly avoided being the weakest performing strategy of the year, as their 0.9% return for December, the strongest median gain for the peer group in three months, reduced the 2018 loss to -8.8%, ahead of the European equity, emerging manager and leveraged multi-strategy peer groups.

The RPM Evolving CTA Fund was one of the few funds to finish in positive territory; the fund gained 3.8% in December to finish the year with up 1.7%.

The HFM InvestHedge European Equity Index posted the greatest decline in 2018. Its 2.2% fall in December marked the fifth consecutive month of losses for the index, which fell by 7.9% in the fourth quarter, outweighing its 5.4% loss for the same period in 2008. Every fund in the peer group was down for the year, with losses that ranged from -2.4% for the strongest performer, and -23.8% for the weakest performer.

Emerging manager-focused funds also suffered significant losses in the fourth quarter to finish the year down by 9%. The HFM InvestHedge Emerging Managers Index was down for the fourth consecutive month in December, with a loss of 3.9% that resulted in a -10% return for the quarter.

Data: FoHFs fall 1.4% in December; conclude worst year since 2011 on HFM InvestHedge.