Hedge Fund Strategies: Which Will Perform Well This Year?

Of the many hedge fund strategies that exist, only a couple of them are being fingered by hedge fund managers as being the most likely to be successful his year. Preqin‘s All-Macro Strategies benchmark performed fairly well, returning 1.99% in 2014.

All-Macro all the way

However, it didn’t outperform the firm’s All-Strategies Hedge Fund benchmark, which returned 3.78% in 2014. Nonetheless, it is the All-Macro Strategies benchmark that hedge fund managers generally expect to lead the way this year, according to a recent survey.

Preqin shared a copy of its 2015 global hedge fund report with ValueWalk. The extensive report offers a look back at the performance of the world’s top hedge funds and their strategies as well as a look forward at what to expect this year.

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In 2014, hedge funds added $355 billion in assets under management in spite of the volatile macro environment, according to the firm. Because of the volatility, the monthly hedge fund benchmark fell into the red six times in 2014, but that clearly didn’t seem to matter.

Preqin’s survey indicates that 70% of hedge fund managers reported an increase in their assets under management. Twenty-one percent of them reported that their assets under management remained the same, while only 9% reported a decrease.

The best and worst performing hedge fund strategies

The survey also indicates that most hedge fund managers think macro strategies will be the way to go this year. Close on macro’s heels though is equity strategies, according to the survey.

On the other hand, hedge fund managers seem to thin the worst-performing strategies this year will be the multi-strategy approach and the credit strategy approach. Managers are especially bearish on credit strategies, as nearly a third of them said they think credit will be the worst-performing hedge fund strategy this year.

They’re not too keen on relative value strategies either this year. Here’s a look at how all the most popular hedge fund strategies stack up against each other in Preqin’s survey (All graphs in this report are courtesy Preqin):

Hedge fund strategies favored by managers this year

In spite of the expectation that macro strategies will do the best this year, only 5% of hedge fund managers are planning to launch new funds following this strategy this year. At just 5%, the macro strategy is actually at the bottom of the pile in terms of the number of funds that will follow that strategy that are expected to be launched this year.

The greatest chunk of new funds are expected to follow the equity strategy, according to the survey, as 41% of managers who participated said they plan to launch new equity-focused funds this year. In second place is the managed futures / CTA strategy, as 23% expect to launch a new fund following this strategy in 2015. This strategy could also perform well this year if last year’s market volatility continues.

Here’s a look at the breakdown of each strategy in terms of how many managers plan to launch new funds for them this year:

hedge fund strategies