Hedge Fund Alpha Alive Again? Credit Suisse Has Some Interesting Data

The top performing hedge funds year to date are Convertible Arbitrage, Emerging Markets, according to an October hedge fund performance report published by Credit Swisse prime brokerage unit. The worst performers are Managed Futures and Long / Short Equity, while none of the strategies outperformed the S&P 500, which is up 7.46% year to date. The interesting tale to be told, however, might be seen in correlation analysis.  What might be the most interesting tidbit ... is that despite the death of alpha meme, according to the data from CS every major hedge fund category produced positive alpha over the past five years! See the chart below for those numbers.

Q3 2016 Hedge Fund Letters

Convertible Arbitrage top performing strategy while Managed Futures, up earlier in the year, drags along the bottom

Convertible Arbitrage strategies are up 6.2% year to date with a fairly tight returns dispersion from top to bottom. Credit Suisse data shows the average bottom quartile fund average is positive by 4.3% while the top quartile fund is up 7.9%. By contrast, Managed Futures is down -5.4% year to date with a wide returns dispersion from -8.1% for the bottom quartile performers and -0.2% for the top quartile performers. Looking at returns from November 2013 to present, however, Managed Futures has been the top performer.