Two hedge funds tell the up and down story of the industry in2017.

Equity fund Coatue Qualified Partners soared 24% on its techbets while the Caxton Global macro fund dropped 13.4%, according toan investor document and people familiar with the matter. Theequity and macro strategies served as bookends for the industry,which delivered a lukewarm overall performance for the year.

Hedge funds last year returned 6.5% on average on anasset-weighted basis, the best annual performance since 2013,according to a Hedge Fund Research report Monday. That good newshas been overshadowed by the broader stock market rally and floodof money into passive products by investors no longer willing topay high hedge fund fees.

“At this point, it's basically a marathon and they're prettytired,” said Joe Marenda, a hedge fund specialist atCambridge Associates. “It was a year of fairly steady-Eddiegains—brick by brick, building their track record for theyear.”

Equity strategies outran all others, jumping 12% last year asthey rode the wave of the rising stock market. RenaissanceTechnologies' Institutional Equities Fund gained 15.2% in 2017,despite its 2.3% dip in December, according to investordocuments.

While funds with equity strategies served as a bright spot, manyof them trailed the markets in which they traded. The S&P 500Index rocketed almost 22% last year, supported by steady economicgrowth and optimism for President Donald Trump's tax overhaul.

Macro managers had little to be optimistic about. Low globalinterest rates and volatility lashed their funds, which rose 4% onaverage last year, the worst-performing strategy. The muted marketenvironment took a toll on some macro titans: Paul Tudor Jonesclosed his Discretionary Macro Fund and John Burbank shut hisflagship macro fund.

Hedge funds may not fare any better this year, said Marenda, whodoesn't expect big changes in the market environment. Investorswill continue to compete for a relatively small number of publiclytraded companies as some firms choose to stay private. Higherinterest rates may offer the clearest opportunity for portfoliomanagers, but that doesn't mean that macro funds will bounceback.

“In discretionary macro, I would expect the large funds tocontinue to have a difficult time,” he said.

From: Bloomberg News

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