06/01/2015
Performance of hedge funds remains highly volatile year on year
Hedge funds lack consistency, it is well known. In the most recent Preqin study dedicated to the performance of hedge funds (“November Hedge Fund Spotlight Report,”) the list of the 100 best-performing hedge funds of the year to the end of September 2014 includes only three hedge funds which were already present in the previous year of the rankings. In the extended period from September 2012 to September 2014, the number of hedge funds which show such consistency is ten.In other words, these statistics clearly reveal, if this were needed, the risks related to an overly short-term approach to investment in hedge funds, whose returns may by their very construction be highly irregular.The year 2014 was particuarly difficult due to geopolitical tensions, the falling price of oil, the Ebola epidemic, slowed demand for commodities and difficulties with the Japanese economy. In this context, the seven strategies selected by Preqin have earned returns similar to those of their respective indices.The macro strategy was the best performer, with gains of 27.51%, while the least-well performing strategy was relative value, with growth of 20.04%. The performance of the other five strategies – long/short equities, asset back lending, event-frizen, CTA and multi-strategy, fall between these limits.It is to be noted that among the best-performing funds on the list, long/short equity strategies dominate by far, representing 70% of the total.
