While a 4 percent loss in 2018 is mediocre, it was the first time hedge funds beat the S&P 500 in a decade.
Hedge funds narrowly outperformed the market last year, posting a 4.07 percent annual loss versus the S&P’s 4.38 percent retreat including dividends, according to data from Hedge Fund Research and analysis from CNBC’s Leslie Picker. The last time the group beat the market was in 2008 during the financial crisis.
Hedge funds held up relatively well in December amid the stock market’s worst month since the Great Depression. They fell 1.97 percent in the volatile month versus the S&P 500’s 9 percent sell-off, according to HFR.
Defensive macro hedge funds and quantitative, trend-following CTA strategies even posted gains during that month.
One of the stellar performers was the world’s largest hedge fund, Bridgewater. The firm’s flagship Pure Alpha fund finished the year with a gain of 14.6 percent net of fees. Renaissance Technologies’ RIDGE Fund gained more than 10 percent last year, while its equities fund surged 8.5 percent.
There were also big losers. All-star manager David Einhorn just ended his worst year since he founded Greenlight Capital in 1996, with his main fund bleeding 34 percent. Another billionaire manager who struggled big time in 2018 was Dan Loeb — his firm Third Point lost about 6 percent in December alone, bringing its yearly loss to about 11 percent.