25/04/2012
Hedge funds outperformed traditional asset classes over 17 years
Hedge funds significantly outperformed traditional asset classes such as equities, bonds and commodities over the last 17 years according to a new study by The Centre for Hedge Fund Research at Imperial College in London, commissioned by KPMG, the international audit, tax and advisory firm, and the Alternative Investment Management Association (AIMA), the global hedge fund association. The report, entitled “The Value of the Hedge Fund Industry to Investors, Markets and the Broader Economy”, found that, per annum, hedge funds returned 9.07% on average after fees between 1994 and 2011, compared to 7.18% for global stocks, 6.25% for global bonds and 7.27% for global commodities. Moreover, hedge funds achieved these returns with lower risk volatility as measured by Value-at-Risk (VaR) than either stocks or commodities. Their volatility and Value-at-Risk were similar to bonds. The research also demonstrated that hedge funds «were significant generators of “alpha”", creating an average of 4.19% per year from 1994-2011. Portfolios including hedge funds also outperformed those comprising only equities and bonds, The Centre for Hedge Fund Research concluded. The study showed that such a portfolio outperformed a conventional portfolio that invested 60% in stocks and 40% in bonds. The returns of the portfolio with an allocation to hedge funds also yielded a significantly higher Sharpe ratio with lower “tail risk”.The new report, whose purpose is obviously to demonstrate the advantages of hedge funds, is the first of a two-part series on the state of the global hedge fund industry. Part two of the report, which will be released in May, is based on a global survey of hedge fund managers.
