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Event Driven Remain The Top Performing Strategies For Hedge Funds

Event driven strategies remain the top performing strategies for hedge funds so far this year as they returned 10.79%.

According to Preqin’s recent report, the proportion of sovereign wealth funds with a preference for event driven strategies has shown an increase over the last year, as it increased to 35% from 27% posted last year.

Event driven strategies perform well

While event driven strategies garnered the top performing strategies for the year to date, long/short strategies exceeded those of event driven strategies in Q3 2013.

The following table summarizes the preliminary September 2013 performance benchmarks:

Summary of performance benchmarks hedge funds

As is evident from the above table, Preqin’s benchmarks indicate the third quarter ended on a high, with single manager funds posting 1.74% across all regions and strategies for September and the highest since January with 2.48%.  Despite the bounce back from the -0.10% reported in August, the industry’s year-to-date return of 7.33% is below the 7.37% gain reported during the same period last year.

U.S. funds of hedge funds garnered maximum share

According to a recent blog post by Ben Pearson of Preqin, assets under management of fund of hedge funds managers worldwide have dropped from a peak of $1.2 trillion in 2008 to $784 billion. However, U.S.-based managers garnered the maximum share as they currently manage $518 billion, compared to $477 billion and $500 billion in December 2011 and 2012 respectively.

U.S.-headquartered funds of hedge funds are up 6.53% for the year, with Morgan Creek Global Equity Long/Short Institutional Fund being the top performing vehicle from the U.S. this year. The fund posted returns of 4.86% in September taking its year-to-date net returns to 13.01%.

U.K. – the second-largest region

According to Preqin, the U.K. is the second-largest region for hedge fund management, next only to the U.S., with over $401 billion in hedge funds managed by U.K.-based fund managers.

Long/short strategies dominate the U.K. fund landscape with 48% of all funds pursuing the strategy. Some managers having long/short strategies have enjoyed large inflows and strong performance over the past year.

The following graph provides the breakdown of hedge funds managed by U.K.-based firms by strategy:

UK based hedge funds by strategy

According to Preqin’s report, Man Group is the U.K.’s largest alternative asset manager with $40.3 billion in assets under management. Besides, 55% of U.K.-based hedge fund investors allocate to funds of hedge funds, and 25% are looking for new fund investments in the next 12 months.

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