Alternative Assets

Hedge fund managers have got off to a strong start in 2015. Following a year which saw the average hedge fund deliver returns of 3.78%, managers have already returned 2.52% on average two months into the year. Given that performance was named as the key concern in the industry in 2015 by investors in a Preqin survey at the end of 2014, managers will have been keen to deliver strong performance early in the year. The challenge, and opportunity, still remains for hedge funds to continue this performance, particularly amidst strong equity markets and turbulent commodity markets.

Other Key Hedge Fund Performance Stats:

  • Equity Strategies Leading the Pack: All main hedge fund strategies generated positive returns in February 2015, with equity strategies posting the highest monthly return of 3.28%. . Oil Prices Causing Problems: The reversal in falling oil prices led to CTAs generating their lowest monthly return since October 2014, and only just hung on to positive performance with average returns of 0.20%.
  • Strong Activism Performance: Activist hedge funds generated their highest monthly return since January 2013 with average returns of 3.22% in February. This follows a month of negative performance for these funds in January, with -0.43% returns.
  • Credit Strategies Deliver Strong Track Record: In February, credit funds posted average returns of 1.61%. Credit strategies have only generated two months of negative performance since July 2013. . Funds of Hedge Funds Strengthen: Funds of hedge funds have posted their fourth consecutive positive monthly return of 1.72%. Over a 12-month period, these vehicles are up 4.78%.
  • Fund Managers Are Confident of Better Performance: 60% of fund managers surveyed at the end of 2014 predicted that in 2015 the Preqin All-Strategies Hedge Fund benchmark will be higher than in 2014, compared to 22% that believe it will be the same or lower (18% currently unsure).

Comment from Preqin: “Hedge fund managers have delivered a welcome boost to performance last month. The average hedge fund has returned 2.49% through February, following the worst year for hedge fund performance since 2011. Investors came into 2015 concerned with the average returns they had received on their hedge fund investments last year. Following some high profile institutional exits from hedge fund investment in 2015, the value of hedge funds within institutional portfolios has been increasingly scrutinized.

Despite investors typically allocating to hedge funds for risk-adjusted returns over longer time frames, this short-term return to form, the highest in over two years, will go some way in allaying investor concerns. Fund managers will now have the tricky task of continuing to capitalize on current macro opportunities to deliver the better performance promised in 2015, in order to prove the true value of hedge funds within a diversified portfolio.”

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