Key Takeaways
- • Hedge funds posted a 2.02% return for 2015, marking the lowest annual performance since 2011 when the industry declined 1.77%, according to the Preqin All-Strategies Hedge Fund benchmark.
- • December 2015 performance deteriorated with a -0.40% return, pushing hedge funds into negative territory for five of twelve months while only three months achieved gains exceeding 1.00%.
- • Commodity trading advisors (CTAs) experienced severe underperformance, declining 0.49% in 2015 compared to a +10.86% gain in 2014, with funds of CTAs posting the worst returns across all strategies at -6.77%.
- • Systematic hedge funds outperformed discretionary strategies (5.92% vs. 2.32%), while small hedge funds delivered the strongest returns across all size classes at 2.93% despite enduring four consecutive months of losses mid-year.
- • Equity and credit strategies both posted December losses of -0.64% and -0.55% respectively, with event-driven strategies flat to slightly negative for the full year at -0.07%, while relative value strategies proved the sole bright spot at +5.03%.
Summary
The hedge fund industry concluded 2015 with historically weak performance, recording a 2.02% annual return that represents the lowest annual gain since 2011. The year-end deterioration was particularly acute, with December delivering a -0.40% loss across the Preqin All-Strategies benchmark—the primary performance barometer for institutional investors tracking the sector. This weak finish underscores a challenging year marked by consistent underperformance, with negative returns posted in five of twelve months and only three months generating gains above 1.00%.
Strategy-level performance diverged sharply, revealing winners and losers within the broader underperformance narrative. Relative value strategies emerged as the clear outperformer with a +5.03% annual return, while systematic hedge funds delivered 5.92% versus discretionary funds' 2.32%—a meaningful 355 basis point gap highlighting the performance advantage of quantitative approaches in volatile conditions. Volatility-focused funds also proved defensive, returning 5.06% for the year. Conversely, commodity trading advisors suffered a dramatic reversal, plummeting from a +10.86% gain in 2014 to a -0.49% loss in 2015, with funds of CTAs experiencing the worst performance across all strategy types at -6.77%. Event-driven strategies essentially broke even at -0.07%, while equity and credit strategies both experienced December losses of -0.64% and -0.55% respectively.
Performance by fund size revealed an unexpected pattern, with smaller hedge funds demonstrating superior resilience despite significant mid-year turbulence. Small hedge funds gained 2.93% for the full year—the highest among all size cohorts—even after posting negative returns in four consecutive months from June through September. Large hedge funds returned 2.17% while emerging hedge funds lagged at 1.32%, indicating that scale provided no protective advantage in 2015's volatile environment. Asia-Pacific-focused funds were similarly tested throughout the year, reflecting the region's equity market stress and currency headwinds that characterized much of 2015.
Strategy-level performance diverged sharply, revealing winners and losers within the broader underperformance narrative. Relative value strategies emerged as the clear outperformer with a +5.03% annual return, while systematic hedge funds delivered 5.92% versus discretionary funds' 2.32%—a meaningful 355 basis point gap highlighting the performance advantage of quantitative approaches in volatile conditions. Volatility-focused funds also proved defensive, returning 5.06% for the year. Conversely, commodity trading advisors suffered a dramatic reversal, plummeting from a +10.86% gain in 2014 to a -0.49% loss in 2015, with funds of CTAs experiencing the worst performance across all strategy types at -6.77%. Event-driven strategies essentially broke even at -0.07%, while equity and credit strategies both experienced December losses of -0.64% and -0.55% respectively.
Performance by fund size revealed an unexpected pattern, with smaller hedge funds demonstrating superior resilience despite significant mid-year turbulence. Small hedge funds gained 2.93% for the full year—the highest among all size cohorts—even after posting negative returns in four consecutive months from June through September. Large hedge funds returned 2.17% while emerging hedge funds lagged at 1.32%, indicating that scale provided no protective advantage in 2015's volatile environment. Asia-Pacific-focused funds were similarly tested throughout the year, reflecting the region's equity market stress and currency headwinds that characterized much of 2015.
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