Hedge Funds Off To Worst Start Since 2008

Apr 16 2014 | 8:23am ET

We knew hedge funds weren't off to a stellar start in 2014, but according to data provider Preqin, they're off to their worse start since 2008.

Hedge funds posted a loss of 0.23% in March, a return of 1.75% in February and a loss of 0.25% in January leaving the Preqin All Hedge Fund Strategies benchmark up 1.23% year-to-date.

Hedge funds did better in Q1 2013, when they were up 3.76%, and in Q1 2012, when they were up 6.07%.

Event-driven strategies were the best-performers in Q1 2014, adding 2.94%, while macro strategies turned in the worst performance, returning 0.51%.

Preqin reports that long/short equity continues to be the strategy most popular with institutional investors, having been included in 68% of investor searches in Q1 2014. Long/short strategies also represented a higher proportion of fund launches in Q1 (53%) than in any of the previous quarters since Q1 2012.

Fund of hedge funds managers represented a higher proportion of all fund launches in Q1 2014 (12%) than they did in Q4 2013, as well as a higher proportion of investor searches initiated (66%).

CTAs continue to post disappointing returns, shedding 0.13% YTD; however, there was a 5 percentage point increase in the proportion of investor searches targeting CTAs between Q4 2013 and Q1 2014.

“The mood entering 2014 was buoyant for the hedge fund industry, following two back-to-back years of double-digit returns in 2013 and 2012. However, the first quarter of 2014 has been one of mixed results, representing the worst start to the year for hedge funds since 2008,” said Preqin's Amy Bensted in a statement.

“Despite the volatile start to the year, investors look set to stay the course with hedge funds in the short term as fund searches continue to be issued for the year ahead. The industry will be waiting to see how the second quarter of the year unfolds, not only in terms of performance, but also in how investors and fund managers react to the changing market conditions both in terms of new capital flowing into the asset class, and what funds pick up these inflows.”


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