Preqin’s Hedge Fund Spotlight 2013 rounds in on Long/Short Equity as the best performing hedge fund strategy of Q1 2013, which posted a cumulative net return of 4.43 percent in the first quarter, whereas the long-only hedge funds were up 7.99 percent over the same period, contributing significantly to the returns of L/S equity overall. Asia-Pacific focused funds returned the highest compared to any other region, rising as high as 8.9 percent in Q1, followed by North American region gaining 4.42 percent.
Long/Short Credit funds were also among the top gainers with a 3.52 percent return for the last quarter. However, as seen historically, Event Driven category came at second place after L/S equity with a net return of 3.8 percent in Q1. The gains in Event Driven strategy was attributable to increased hedge fund activism in the first quarter.
Macro and CTA’s continued to underperform compared to other strategies. Fund of hedge funds posted a +3.35 percent average return in last quarter, which is the best this category has done in a year. However, the number of FoF launches has been steadily declining, only 17 opened in Q1 2013. In 2012, 70 fund of hedge funds opened shop compared to 87 FoF’s launching in 2011.
Some interesting facts from Preqin’s report are that while macro focused hedge fund launches decreased in the last quarter, investor interest in the strategy is at the highest since Q2 2012. Macro fund launches made up 14 percent of all launches in Q1, whereas 29 percent of investors responded that they are seeking macro funds which is a significant increase in interest compared to Q4 2012. Investors’ spiked interest is of course related to Abenomics, which came as a blessing for global macro funds with short yen positions. Japan focused funds have broken records of high returns in Q1.
CTA performed even worse, with the strategy posting an average return of 0.21 percent only. Investor interest in the strategy also fell to 17 percent in the last quarter. The decline in precious and base metals wreaked havoc with managers with long exposure in these commodities.
Of all hedge fund launches, 58 percent were L/S equity, 14 percent were Macro funds, 11 percent Event Driven and 10 percent were Relative Value hedge funds. While Macro launches were the second-most popular in Q1, their percentage is lesser than that recorded in Q4 2012 when 32 percent of all launches were Macro hedge funds.
Across regions, 81 percent of all newly opened hedge funds originated in the North America and Europe accounted for 12 percent of all launches, which is a lower than expected number.
Read the full report here.