Which asset classes lost investors most money in 2016?
20 Dec 16
Thanks to the end-of-year ‘Trump rally’, 2016 has been a pretty good year for investors in risky assets. However, not all asset classes have fared so well.
Long/short equity and bond managers have struggled in 2016 as they failed to take advantage of market volatility. The best example is probably the aftermath of the Brexit vote: as stocks fell and then quickly recovered, long/short funds fell too but then failed to bounce back. Long/short equity funds have languished in negative territory all year, and 2016 will go down in the history books as their worst year on record. Long/short equity funds are down over 4% in euro terms.
Long/short bond managers have done little better. In the first half of the year, they had the excuse that there were little opportunities to make money as bond market volatility was low and yields just kept going down. This changed in the second half of the year, but performance has remained lacklustre. Long/short bond funds have bounced back a little since Donald Trump’s election sparked a spike in global bond yields, but performance remains firmly anchored in negative territory.
Will long/short managers do any better in 2017? Long/short funds are perhaps the ultimate short-duration assets. In an environment where long-duration assets have been favoured, it is understandable they haven’t delivered. As we now finally seem to be entering a ‘reflationary’ environment, perhaps this will give long/short managers some badly needed wind in their sails.
