Managed futures funds posted the best average return of any hedge fund strategy in the third quarter of 2013, reversing a trend of underperformance, according to data from eVestment.
Funds using this strategy—which primarily involves trading in derivatives contracts—posted an average return of 3.5% during July to September, one of only two strategies to have recorded positive performance. In the first nine months of 2014, managed futures funds were the third-best performers behind distressed and activist funds.
Yet the sector has suffered $25 billion in outflows this year alone, and two years of continuous redemptions. In 2013, $32 billion was withdrawn from managed futures funds. In 2013, the strategy recorded an average return of just 1.1%—the weakest of the 11 separate strategies covered by eVestment.
The data company said the uptick in returns would come as “a relief” to the sector. The funds are generally trend-driven, and have struggled while the majority of asset classes have been buoyed by central bank asset purchases. Despite indications that more institutional investors were allocating to hedge fund strategies—the California Public Employees’ Retirement System aside—investor appetite for managed futures in particular has remained low.
In a recent blog, sector specialist Attain Capital played down the significance of the outperformance. “We’re not going to cue the parade, just yet,” the company wrote. “It’s the best quarter we’ve seen out of managed futures since 2008, but it’s just one quarter nonetheless.”
In contrast, some of the most popular hedge fund sectors among asset allocators underperformed in Q3. Event-driven strategies, which have attracted $43 billion in inflows this year, lost more than 1% in the third quarter, while the two most popular sectors in 2013, multi-strategy funds and relative value credit funds, lost 0.3% and 2.1% respectively.
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