The hedge fund industry has continued to be racked by investor frustration, massive withdrawals and redemptions, and flimsy return levels all the way through the end of 2016. Many funds have taken drastic measures by changing fee structures, overall strategies, or even, in some extreme cases, shutting down entirely. And yet, a few hedge funds have managed to take advantage of the opportunity to bring in great results this year. Which funds saw the best returns and general success in 2016, and how might they have managed to do it?

Cheyne Capital Posts 42.7% Gains For One Fund

Cheyne Capital, the hedge fund based out of London, saw its Total Return Credit Fund up 42.7% through the end of the month of October. While hedge funds focusing on credit strategies have posted average gains of just 6.7% on the year, this constitutes a massive success. What was the secret to Cheyne's success? According to a report in Financial Times, a person closely involved with the fund indicated that it benefited from steadily weathering volatility across a number of sectors. Volatility was up this year because of continued mixed messages from many central banks across the globe.

CQS Sees One Fund Up Over 30%

CQS saw great success for its directional opportunities fund as well. The $2.7 billion fund, managed by Sir Michael Hintze, had posted gains of upwards of 30% by the end of November of this year. Its returns in November alone were 6.1%, largely due to its structured credit side as well as its macro strategies, according to a letter to investors from the month of October. However, CQS has not only seen benefits to this particular fund, but across its $12 billion collective investments as well. Its credit multi-strategy focus fund has seen gains of 12% this year.

Overall Trend is Less Optimistic

While these and other select hedge funds have managed to bring in great numbers this year, most other funds are not so lucky. Generally, investors have compared the hedge fund industry against the S&P 500 as a benchmark. The S&P 500 gained about 9% in 2016, while average hedge funds saw just 4% gains in the same time period. Should this trend continue through the end of the calendar year, as most analysts expect it will, hedge funds will be on pace to have underperformed the broader market for the 8th year in a row. Many analysts see the fallout from the 2008 financial crisis as still affecting hedge fund returns. The difference in 2016 has been that investors are becoming increasingly impatient with those hedge funds, pulling their assets out to invest them elsewhere. This of course only makes matters worse for hedge funds in question.

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