Market Neutral Funds: Best And Worst Of November
By DailyAlts Staff (click to enlarge) Market-neutral funds balance long and short holdings, generally in pursuit of something close to a 0% net-long exposure. This allows investment managers to neutralize beta and focus on generating alpha – or at least, that’s the idea. In November, the top three market-neutral mutual funds generated returns ranging from +0.94% to +3.52%, while the category’s three laggards returned between -2.53% and -3.19%. In this month’s review, we look beyond November’s performance and also consider the composition of each of the featured funds’ three-year standard deviation and Sharpe ratio. (click to enlarge) November’s Top Performers The top performing market-neutral mutual funds in November were: (click to enlarge) The QuantShares US Market Neutral Momentum ETF fund led the pack last month with its decidedly strong returns of +3.52%. Year to date through November 30, the fund had spectacular gains of 20.43%, but its annualized three-year return through that date stood at a lower +3.80%! Overall, the QuantShares US Market Neutral Momentum Fund’s three-year Sharpe ratio stood at 0.31. The Hussman Strategic International Fund’s +1.37% returns in November weren’t quite as impressive, but were still strongly positive for the month. However, the fund’s three-year return of -1.91% through November 30 is less impressive. On a risk-adjusted basis, the Hussman fund’s three-year Sharpe ratio stood at a dismal -0.28, as of November 30. Perhaps the best looking of the three funds was November’s third-best performer, the Turner Titan II Fund, which posted a 0.94% gain for the month. Its three-year annualized return of 4.69% is much stronger than its peers’, and the three-year Sharpe ratio of 0.82 is by far the best of any market-neutral fund reviewed this month. November’s Worst Performers The worst performing market-neutral mutual funds in November included: (click to enlarge) The Whitebox fund was the month’s worst, at -3.19%. For the first eleven months of 2015, the fund lost 6.56%, but its three-year annualized returns were in the black at +1.44%. What’s more, the fund’s Sharpe ratio of 0.27 was not only better than either of November’s other worst performing market-neutral funds, but among the top three of the six funds covered this month. The QuantShares US Market Neutral Value Fund lost 2.98% in November, bringing its year-to-date losses to 10.03% as of November 30. The fact that QuantShares has found itself on both the Best and the Worst lists for the month is a clear indication that momentum exposure worked in November (and the year), and value did not. On a three-year basis, the fund was in the black, with annualized returns of +0.30%. Finally, the Hussman Strategic Growth Fund was November’s third-worst performer, also earning Hussman the distinction of being in both the penthouse and the doghouse for the month. Of the three biggest losers from last month, the Hussman fund has the worst looking long-term results: a three-year annualized return of -8.88%. Its three-year Sharpe ratio of -1.38 was also easily the worst of the bunch. Past Performance does not necessarily predict future results. Meili Zeng and Jason Seagraves contributed to this article.