Hedge funds have continued to struggle throughout 2016, plagued by a combination of low return levels, investor frustration, and increasing redemption requests. In the toughest cases, some funds have had to change strategies entirely or even to close up shop. While there are some funds that manage to eke out success in even the worst times, across the industry the trend suggested otherwise. Firms focusing on gold and mining, and those that look primarily toward countries with economies dependent on natural resources, tended to do better this year. On the other hand, absolute return funds tended to have the toughest time. These funds are among those with the worst performance levels of 2016.
Argonaut Absolute Return
According to a report by the Telegraph, the worst-performing fund of 2016 was Argonaut Absolute Return. Argonaut's return level from January 1 of 2016 through December 14 was a dismal -26%. The negative performance is ironic considering the purpose of absolute return funds, which are designed to maintain some type of positive return regardless of the market conditions.
Invesco Korean Equity
Following Argonaut on the list of worst-performing funds for this year is Invesco Korean equity. This fund, housed within the larger Invesco group of funds and focusing on Korean markets, saw returns of -24%, nearly as bad as Argonaut's Absolute Return Fund but not quite making it to the top of this list. Part of the difficulty for Invesco Korean Equity may be the fund's approach, which involves highly concentrated investments in a small number of holdings. When one or more of these holdings fails, so do the fund's returns.
Candriam Equities L Biotechnology
The biotech arm of Candriam, the pan-European investment group, posted the third-lowest return levels for 2016. Through the last two weeks of the year, Candriam Equities L Biotechnology had seen returns of -19%. In an overall bad year for biotech-focused firms, Candriam seems to have fared the worst. Debates on drug pricing in the United States have had a major impact on the sector around the world, crippling stock prices.
Julius Baer Multistock Health Innovation
Julius Baer, the globally-focused Swiss private bank, saw the biggest losses in its fund focusing on the healthcare sector. The multistock Health Innovation fund had a difficult year, reaching mid-December with returns of -18%.
Odey Absolute Return
Like Argonaut Absolute Return, Odey saw many of its former winning positions reverse in 2016. Its Absolute Return fund was down 18% this year, while its Total Return fund saw losses of 13%. The flagship European fund in Odey's group was down a net 55% this year as well.