Hedge funds finished last year up 2.42%, beating equities and bonds on an absolute and risk-adjusted basis, according to an analysis of performance data by the Alternative Investment Management Association (AIMA), the global representative body for alternative asset managers.

AIMA said the analysis, based on returns reported to HedgeFund Intelligence (HFI) by funds with total assets under management (AUM) of roughly $1.1 trillion, represented one of the most comprehensive assessments of the global hedge fund industry’s performance last year.

The analysis includes the first measurement of the industry’s risk-adjusted performance in 2015. Risk-adjusted returns are closely watched by institutional investors such as pensions and endowments since they measure both the total return and the volatility of those returns. AIMA’s analysis also contains an extensive breakdown of returns by the different hedge fund investment strategies.

According to AIMA –

• Hedge funds on average outperformed stocks and bonds on both a headline and risk-adjusted basis
• Hedge funds globally finished the year up 2.42% net of all fees
• Around two-thirds of funds (65.30%) reported positive returns
• Risk-adjusted returns were positive, as measured by a Sharpe ratio of +0.52
• The best performing strategies were equity market neutral / quant (up 10.44%), long/short equity (up 6.79%) and multi-strategy (up 5.65%)

Jack Inglis, CEO of AIMA, said: “While 2015 will not be remembered as a vintage year for the industry, the majority of hedge funds still produced positive returns amid challenging market conditions, beating stocks and bonds on both an absolute and risk-adjusted basis and preserving capital for pension funds and other investors. Given that this period of market volatility is set to continue during 2016, we remain confident that hedge funds will continue to meet their investors’ expectations for competitive, diversified and low-volatility returns.”

On a strategy-by-strategy basis, the average returns, according to AIMA’s analysis, were as follows –

Ends

Notes to editors

1.    The analysis covers all hedge funds that reported performance data to HedgeFund Intelligence throughout 2015. Funds of funds are excluded. Average returns are weighted by size of fund. Returns are net of all fees.

2.    Sharpe ratio, a measure of risk-adjusted performance, is calculated by dividing the average excess return of a fund (average return minus risk-free rate) by its volatility (standard deviation). The risk-free rate is the average value of 12-month US Treasury bonds over the year.

3.    The S&P 500 reported up 1.38% (with a Sharpe ratio of +0.08) for 2015. The MSCI World (USD) reported down -0.87% (Sharpe -0.09) for 2015. The FTSE 100 reported down -1.32% (Sharpe -0.13) for 2015.

4.    The Barclays Global Aggregate reported down -3.15% (Sharpe -1.13) for 2015.