Equity Strategies Lead Q2 2020 Rebound in Hedge Fund Performance

Hedge fund performance rebounded in Q2 2020 following the market storm brought on by the coronavirus pandemic.  A strong April led to a rebound in Q2 2020 performance among hedge fund managers (+11.48% according to Preqin), with hedge funds posting the largest quarterly return since Q2 2009 (+14.62%).  Global uncertainty created opportunities for managers who bet on a recovery in corporate debt and emerging markets. The second quarter presented interest in new fund launches, with an estimated 129 new launches in Q2, the highest since Q2 2019.

Hedge fund redemptions slowed in Q2, after US $33 billion was pulled from hedge funds in Q1, as investors looked to cash in on rebounding economies, following pandemic related lockdowns.  However, investors continue to exercise caution with respect to market exposure through hedge funds and related vehicles.

Strategy performance generally improved in Q2 as public markets rallied, encouraged by the US government’s $2 trillion stimulus package and other global stimulus measures meant to curb the effect of the coronavirus pandemic.  Equity and event driven strategies outperformed in Q2 2020, posting quarterly returns of +14.65% and +11.70%, respectively.

The strong recovery among hedge funds in Q2 shows that opportunistic managers are replicating the success of funds that profited when markets bounced back following the financial crisis of 2008.  Managers continue to actively position portfolios for further volatility and to profit from opportunities presented in the current pandemic conditions and ultimate post-pandemic environment.