Equity Long/Short Strategies Witness Strong Rebound In 2013

Equity Long/Short Strategies Witness Strong Rebound In 2013

Equity long/short strategies have made a strong rebound in 2013 with these hedge funds clocking net inflows of $9 billion YTD, notes Deutsche Bank in its recent report.

Deutsche Bank AG (NYSE:DB) (ETR:DBK) in its December 2013 report on Monthly Hedge Fund Trends notes that hedge funds’ performances have echoed the sentiments expressed by investors during survey conducted at the beginning of this year.

Hedge funds assets crossed $2.5 trillion

Deutsche Bank AG (NYSE:DB) (ETR:DBK)’s December 2013 report points out that in its 2013 Alternative Investment Survey conducted earlier, the global hedge fund investors predicted that hedge fund industry assets would rise 11% in 2013 reaching $2.5 trillion by year end.

DG Value Adds 36.4% YTD As Distressed Stocks Surge

Dov Gertzulin's DG Capital is having a strong year. According to a copy of the hedge fund's letter to investors of its DG Value Partners Class C strategy, the fund is up 36.4% of the year to the end of June, after a performance of 12.8% in the second quarter. The Class C strategy is Read More

Interestingly, the hedge fund industry assets this year have already surpassed investors’ expectations by reaching $2.51 trillion by Q32013.

The following graph depicts 2013 year-to-date median performance:

Equity long/short remains favorite

According to the Deutsche Bank AG (NYSE:DB) (ETR:DBK)’s recent report, investors in its Alternative Investment Survey had earlier indicated that equity long/short would be the most sought-after strategy in 2013.

Interestingly, again investors’ expectations have been proved right. The equity long/short strategies have clocked a strong rebound this year, with these hedge funds receiving net inflows of $9 billion YTD against an outflow of $11 billion recorded in 2013. Similarly, performance-based gains reported this year was $79 billion as against $57 billion witnessed in 2013.

The report points out that European equity long / short managers have been in high demand from investors globally. In its January report, Deutsche Bank AG (NYSE:DB) (ETR:DBK) reported that European investors are seeking high quality equity I/s managers who can extract value from what are expected to be rising but volatile equity markets. The report notes that during the course of 2013, European allocators, as well as their global peers, searched for high quality fundamental stock pickers with capacity.

The following graph captures Europe’s 2013 year-to-date median performance, highlighting the strong performance posted by European L/S strategies.

European Equity Long short performance

The report, however, points out that institutional investors in Europe, in particular pension funds, are becoming increasingly sensitive to hedge fund fees.

Chinese investors increasing ticket size

Deutsche Bank AG (NYSE:DB) (ETR:DBK) in its December 2013 report highlights that institutional allocators in China have been increasing their ticket size with existing managers. The report also points out the approval of the pilot Qualified Domestic Limited Partner program in China allows hedge funds to raise onshore money and invest in overseas markets.

The report also notes while Hong Kong investors focus solely on Asian manager allocation, Singapore investors focus on Asia-focused funds having consistent performance.

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