Key Takeaways
- • 2011 marked a historically difficult year for hedge funds, with the Eurekahedge Hedge Fund Index registering the second-worst performance in its history and fund closures reaching record highs, yet a select group of 15 funds delivered double-digit returns despite market turmoil.
- • Top-performing funds employed diverse strategies across fixed-income arbitrage and equity long/short positioning, with returns ranging from approximately 10.14% to over 10.2% as of late December 2011, demonstrating that strategy differentiation and active management remained profitable during broad market weakness.
- • European-focused equity and relative value strategies led performance, with funds such as Ennismore European Smaller Companies (10.21% return, $273 million AUM) and JP Morgan Portfolio Strategies Europe Dynamic L/S Fund (10.2% return, $384 million AUM) capitalizing on selective opportunities in European equities and credit markets.
- • Asset bases for top-performing funds ranged from $160 million to $384 million, indicating that strong 2011 performance was not confined to mega-cap managers but distributed across mid-sized specialized investment vehicles with focused investment theses.
Summary
The investment management industry faced severe headwinds throughout 2011, with the Eurekahedge Hedge Fund Index reporting the second-worst annual performance in its history and hedge fund closures reaching record levels. However, a concentrated cohort of 15 investment funds bucked this negative trend, delivering robust returns that highlighted the value of active management and strategic differentiation during a year marked by significant macroeconomic uncertainty and equity market volatility.
HSBC's year-end Hedge Weekly performance review identified the top-performing funds across its tracking universe. The highest-returning strategies clustered around fixed-income arbitrage and European-focused equity long/short positioning. III Relative Value Credit Strategies Fund Ltd, managed by Garth Friesen under III Offshore Advisors, generated a 10.14% return on $160 million in assets as of mid-2011 using a fixed-income arbitrage approach. Similarly, JP Morgan Portfolio Strategies Europe Dynamic L/S Fund delivered 10.2% returns managing $384 million for its team of portfolio managers including Jonathan Ingram, John Baker, and Anis Lahlou-Abid, while Ennismore European Smaller Companies, under manager Geoff Oldfield, achieved 10.21% returns with $273 million in assets under management.
These results underscore a critical distinction between aggregate hedge fund performance and manager-specific outcomes in 2011. While industry-wide metrics deteriorated substantially, funds with concentrated regional expertise, specialized strategies, and disciplined risk management generated meaningful positive returns for investors. The outperformance of European equity and credit-focused strategies suggests that managers navigating sector-specific opportunities and maintaining active risk management proved resilient during a period when passive strategies and generalist managers faced substantial challenges.
HSBC's year-end Hedge Weekly performance review identified the top-performing funds across its tracking universe. The highest-returning strategies clustered around fixed-income arbitrage and European-focused equity long/short positioning. III Relative Value Credit Strategies Fund Ltd, managed by Garth Friesen under III Offshore Advisors, generated a 10.14% return on $160 million in assets as of mid-2011 using a fixed-income arbitrage approach. Similarly, JP Morgan Portfolio Strategies Europe Dynamic L/S Fund delivered 10.2% returns managing $384 million for its team of portfolio managers including Jonathan Ingram, John Baker, and Anis Lahlou-Abid, while Ennismore European Smaller Companies, under manager Geoff Oldfield, achieved 10.21% returns with $273 million in assets under management.
These results underscore a critical distinction between aggregate hedge fund performance and manager-specific outcomes in 2011. While industry-wide metrics deteriorated substantially, funds with concentrated regional expertise, specialized strategies, and disciplined risk management generated meaningful positive returns for investors. The outperformance of European equity and credit-focused strategies suggests that managers navigating sector-specific opportunities and maintaining active risk management proved resilient during a period when passive strategies and generalist managers faced substantial challenges.
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