Hedge funds gained 1.01% during the month of December, with 2016 returns coming in at 4.48%, says alternative research firm Eurekahedge in an index update.

Underlying markets as represented by the MSCI AC World Index (Local) gained 2.38% in December, with 2016 returns coming in at 7.37%, the firm adds, while North American equity markets traded higher in December—as the Trump-driven reflation theme buoyed markets. The S&P 500 Index gained 1.82% during the month, with the Dow Jones Industrial Average up 3.34%.

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Eurekahedge finds central bank actions in the developed world outside of the U.S. have helped mediate year-end jitters to some extent. In particular, the ECB and BoJ have remained committed to their current policies, which support the performance of underlying equity markets.

However, ongoing political and economic events hold much uncertainty for 2017. It remains to be seen how long markets will continue to bank on Trump’s proposed policies.

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Key highlights for December

  • Almost 19.7% of hedge funds posted double-digit returns in 2016, up from 17.6% in 2015.
  • Assets under management shrank for the first time since 2008, as the hedge fund industry contracted by US$21.8 billion in 2016; investor redemptions of US$43.4 billion offset manager performance-driven gains of US$21.6 billion. In 2015, the industry grew by US$108.7 billion, with US$80.7 billion of investor allocations driving the bulk of the industry growth.
  • Among developed mandates, North American and Japanese hedge funds gained 7.77% and 0.32%, respectively, in 2016. European fund managers were down 0.12%.
  • Emerging market mandates have preserved their gains for 2016—up 7.31% for 2016, with strong showing from underlying Latin America and Eastern Europe/Russia mandates. Frontier markets investing hedge funds, as represented by the Eurekahedge Frontier Markets Hedge Fund Index, are up 10.76% for 2016.
  • Among strategic mandates, distressed debt hedge funds posted the best 2016 returns; they gained 12.02%, followed by event-driven and relative value hedge funds which were up 9.70% and 6.64%, respectively.
  • The Eurekahedge Long/Short Equities Hedge Fund Index is up 3.89% for the year 2016, while underlying long-bias equity hedge funds gained 5.82%. This compares with 3.15% and -0.34%, respectively, for 2015.
  • Asia ex-Japan hedge funds posted their fifth month of losses in 2016 and were up 0.66% for 2016, down from a 6.44% gain in 2015. Greater China mandates led much of the weakness during the year, posting their first annual loss in the last five years at -4.66% in 2016 (compared with a gain of 10.24% the year before).
  • Among volatility-focused hedge funds, relative value volatility hedge funds posted the best performance for 2016, gaining 7.79%, followed by short volatility hedge funds which gained 5.37% over the same period.

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