Hedge funds again lagged the returns of U.S. stocks as well as a combined fund of 50% global stocks and 50% global bonds in the third quarter and in October, according to data from eVestment.
Why it matters: Hedge funds aim to deliver consistent returns for investors that outperform during times of market stress, but despite increased uncertainty and geopolitical tensions in Q3, the industry saw negative returns on an overall basis.
- Even equity hedge funds on average underperformed the S&P 500, while financial derivatives funds were the worst performing of all categories last month, showing a 1.33% decline.
- The only hedge funds to outperform the S&P in October were those with large exposure to China, India and Russia.
What it means: With the stock market again in favor, investors are likely to pull even more money out of hedge funds given their lackluster performance during the third quarter.
The big picture: Year to date, not a single major category of hedge fund has outperformed the S&P and the only hedge funds that delivered better returns than the 50% global bonds and equity fund were those dedicated to Chinese and Russian assets.