Alt Investments

Results May Be Improving For Global Hedge Fund Sector After Poor H1 - Preqin

Tom Burroughes Group Editor 17 July 2014

Results May Be Improving For Global Hedge Fund Sector After Poor H1 - Preqin

After the lousiest start to year since 2008 in performance terms, results may turning the right way for the world’s hedge fund industry, according to new figures.

After the lousiest start to year since 2008 in performance terms, results may turning the right way for the world’s hedge fund industry, according to Preqin, the research organization tracking alternative investments.

Second quarter performance was almost twice as strong on average compared to Q1 2014, taking year-to-date returns to 3.86 per cent.

A period of wafer-thin interest rates - and relative low volatility - has made it hard for some strategies to perform well, although a rise in merger and acquisition activity could be good news for event-driven funds that typically try to exploit the price swings that corporate takeover activity generates. With their typically high fees - when compared to long-only funds - hedge funds can suffer if more traditional forms of investment appear to be a better channel for investors.

The hedge fund benchmark, however, is behind the 4.28 per cent year-to-date returns as of the end of Q2 2013, and investors may be expressing concerns that three of the six months in 2014 so far have seen negative average returns.

Event driven strategies continue to lead the way with 5.24 per cent returns on average so far this year. Such strategies were included in 20 per cent of investor searches in Q2, making it the second most searched for fund type after long/short equity.

Macro strategies recovered from a poor first quarter to be the top performing strategy benchmark in the second quarter, with average returns of 2.80 per cent. CTAs (commodity trading advisors) represented just 1 per cent of all fund launches in Q2 2014, and the proportion of investor searches including these funds was down from 16 per cent in Q1 to 10 per cent in Q2 following sustained poor performance.

After being the worst performing regional benchmark in Q1, the emerging markets region category was the best performing region in Q2 with average returns of 4.33 per cent.

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