Smaller reigns supreme in hedge funds

When it comes to hedge funds, the little guy has the upper hand.

Smaller hedge funds — those with less than $100 million in assets under management — have notched the greatest year-to-date gains, standing at 4.1 percent, according to data released by Preqin.

By comparison, funds whose assets exceed $1 billion averaged year-to-date gains of just 0.54 percent, the worst class of performers in terms of size.

Preqin showed largely positive data for the hedge fund industry after a rough patch. Their trailing 12-month performance entered into positive territory for the first time since December, up 1.58 percent.

So far this year, hedge funds are up 3.67 percent.

“After a difficult start at the beginning of the year, 2016 has now proved to be a positive year for hedge fund performance, with July marking the fifth straight month of industry gains,” Preqin said in Friday’s report.

As for the recent success of smaller funds, their size is proving to be an advantage in a challenging environment.

Earlier this week, Barclays released a study of the hedge fund industry and concluded that the hedge fund industry has become too big for the opportunities in it.

“As hedge funds become larger, their investable universe can often be diminished (e.g., due to position limits) as it is often not ‘worth it’ to invest in smaller situations that can hardly move the profit and loss needle,” Barclays wrote.