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Event Driven Remain The Top Performing Strategies For Hedge Funds

By Mani
Updated on

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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