Remember the days when hedge funds were all the rage? In today’s volatile environment not even these funds, which use complex, often aggressive techniques to beat the market, are seeing positive returns.
A new report by the EDHEC-Risk Institute, which is part of France’s EDHEC Business School, says that most hedge fund investment strategies fell flat in August and haven’t made any significant gains year-to-date.
The worst performing investment strategy was distressed securities—usually fixed income that’s rated CCC or below. In August, returns were down 4.08% over the month before, while year-to-date performance fell to -0.3%.
The second worst strategy was “long/short equity,” which involves buying some stocks long, while shorting others. That strategy’s performance fell 4.07% over last month, and was -3.2% year-to-date.
Not surprisingly, the strategy that did best was shorting, which is when investors bet that a stock will fall. Since the market went (mostly) down in August, giving short sellers plenty of opportunity to make money, the strategy gained 7% over the previous month and 5.2% YTD.
Overall, U.S. hedge funds had their worst month since May 2010—down 2.32% according to Hedge Fund Research Inc.
Still, hedge funds fared better than equities and the S&P 500. According to Credit Suisse Index Co., the Dow Jones Credit Suisse Hedge Index fell 2.3% in August, while the Dow Jones Global Index of equities dropped 7.69%. The S&P 500 was down 5.7%.
Hedge funds also took in $477 billion of inflows in August.
Click below for a list of how other hedge fund strategies performed in August.