Which hedge fund strategies are the most effective in the long term, in bull markets and in bear markets?

The purpose of this study was to analyze the performance of hedge fund strategies in the long term (1994-2021) and during periods of bull and bear markets. We wanted to investigate which strategies perform better in the long term as well as whether some strategies perform always better or worse than others during periods of bull and bear markets. After having defined our different sub-periods of crisis, we used performance measures involving the risk and the return. We found that multi-strategy, event driven distressed and global macro are the most effective strategies in the long term while dedicated short bias, equity market neutral, managed futures and emerging markets are the least effective strategies. For periods of bear market, our computations show that dedicated short bias, managed futures and global macro are the best performing strategies while long/short equity, emerging markets and event driven strategies (except event driven risk arbitrage) are the worst performers. As for periods of bull market, we found that event driven distressed, event driven, multi-strategy and event driven multi-strategy are the best performing strategies while dedicated short bias, managed futures and equity market neutral perform the worst. Finally, we also found that the hedge fund sector, represented by the CSHFI, outperforms the overall market (represented by the S&P 500) in the long term, but also during crises and during periods of bull market.