According to Preqin’s Hedge Fund Analyst, hedge funds made gains of 11.08% for the 12-month period ending 31 December 2013, ahead of the 10.13% returned in 2012, and the benchmark loss of -1.93% in 2011. Investors are largely satisfied with the performance in 2013; eighty-four percent of investors interviewed for the 2014 Preqin Global Hedge Fund Report stated that returns expectations had been met or exceeded in 2013.
Hedge funds: Other key facts
- 21% of investors stated returns expectations had been exceeded, the highest level since Preqin started collecting this data in 2008.
- Macro strategies had the worst returns, adding just 2.42% in 2013.
- CTA funds made gains of only 0.08% in 2013, taking three-year annualized returns to 0.85%.
- Funds of funds posted their highest net returns since 2009, gaining 7.72% in 2013.
- January was the best month throughout 2013 for hedge fund performance, with net returns of 2.44%.
- The hedge fund benchmark was in the red for two months in 2013 – down 1.53% in June and 0.14% in August.
- Relative value funds made gains of 7.14% in 2013, and have the lowest three-year volatility of any hedge fund strategy at 1.58%.
- Top quartile funds accumulated returns of nearly 30%.
- Emerging market funds performed poorly compared to counterparts targeting global and developed markets and in contrast to 2012; emerging market funds posted returns of 5.86% in 2013, compared to gains of more than 12% in 2012.
- Asia-Pacific-focused funds made gains of 16.73% in 2013, followed by North America funds (16.55%) and Europe funds (13.55%).
“Much of the recent criticism faced by hedge funds has focused on hedge fund benchmarks being outperformed by leading equity indices, such as the S&P 500. In 2013, the Preqin Hedge Fund Index, a benchmark of average hedge fund returns, again lagged the S&P 500; however, despite this, investors are satisfied with the performance of hedge funds in 2013. Investors are now looking beyond absolute returns; they are also looking for funds to produce strong risk-adjusted returns with low volatility on a consistent basis. The performance of hedge funds over 2012 and 2013 has certainly delivered this. Event driven and long/short funds led the way in terms of performance, with CTA funds producing disappointing returns for the third year in a row. Emerging market funds were unable to sustain the performance into 2013, posting just 5.86% compared to the 12.62% returned in 2012. However, Asia-Pacific focused funds had another strong year, up 16.73%, making it the top performing region in 2013.”