Hedge Funds Are Riding a 5-Month Winning Streak

Hedge funds are riding a hot, 5-month winning streak driven by winning bets primarily in equities after the Covid-19 sell-offs back in March. The HFRI Fund Weighted Composite Index, which measures the performance of the hedge fund industry was up 2.67% last month, according to a Hedgeweek article.

“In the five months since April, following Q1’s coronavirus meltdown, the index has surged 15.4 percent – the strongest five-month total return for hedge funds since February 2000,” the article stated. “That puts its index value to an all-time high of 15,093. Year-to-date, the index is now up more than 2 percent since the start of 2020.”

“HFR President Kenneth Heinz said the impressive run – which is also the third-strongest five-month recovery return from a drawdown trough since HFR’s inception in 1990 – comes despite continued coronavirus concerns globally, ongoing economic and social upheaval in the US, and political uncertainty surround the US election and underlines the industry’s fortitude,” the article added.

Much credit goes to the quants, whose number-crunching prowess produced the best returns.

“Within equities, quantitative-based directional strategies added more than 8 percent in August, while multi-strategy equity hedge funds rose 5.54 percent, specialist energy funds gained 5.70 percent and healthcare-focused strategies added 5.09 percent for the month,” the article said.

ETF investors looking to tail hedge fund bets can look to funds like the Goldman Sachs Hedge Industry VIP ETF (GVIP). The fund seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Goldman Sachs Hedge Fund VIP IndexTM.

The fund seeks to achieve its investment objective by investing at least 80% of its assets in securities included in its underlying index, in depositary receipts representing securities included in its underlying index, and in underlying stocks in respect of depositary receipts included in its underlying index. The index is designed to deliver exposure to equity securities whose performance is expected to influence the long portfolios of hedge funds.

GVIP Chart

GVIP data by YCharts

Another fund to look at is the IQ Hedge Multi-Strategy Tracker ETF (NYSEArca: QAI), which seeks investment results that correspond generally to the price and yield performance of its underlying index, the IQ Hedge Multi-Strategy Index. The fund is a “fund of funds” which means it invests, under normal circumstances, at least 80 percent of its net assets, plus the amount of any borrowings for investment purposes, in the investments included in its underlying index, which includes underlying funds.

For more market trends, visit ETF Trends.