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Investors eager to make more hedge fund plays

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Investors are hungry for hedge funds this year after a strong 2013.

Hedge funds gained 11.1 percent last year, up from 10.1 percent in 2012 and a loss of nearly 2 percent in 2011, according to Preqin, a provider of data and analysis on the alternative assets industry.

Investors were largely satisfied with the performance. Eighty-four percent of investors interviewed for the 2014 Preqin Global Hedge Fund Report said their returns expectations had been met or exceeded in 2013.

Following are some of the report’s key findings:

  • 21 percent of investors said returns had exceeded their expectations, the highest level since Preqin started collecting the data in 2008;
  • Top-quartile funds accumulated returns of nearly 30 percent;
  • Asia/Pacific-focused funds gained 16.7 percent in 2013, followed by North American funds, up 16.6 percent, and European funds, up 13.6 percent;
  • Relative value funds made gains of 7.1 percent in 2013, and had the lowest three-year volatility of any hedge fund strategy at 1.6 percent;
  • Emerging market funds performed poorly — up 5.9 percent — compared with counterparts that targeted global and developed markets and in contrast to 2012, when they gained 12.6 percent;
  • Macro strategies had the worst returns, adding just 2.4 percent in 2013. Commodity trading advisor funds were flat in 2013, taking three-year annualized returns to 0.9 percent;
  • Funds of funds posted their highest net returns since 2009, up 7.7 percent in 2013. “In 2013, the Preqin Hedge Fund Index, a benchmark of average hedge fund returns, again lagged the S&P 500; however, despite this, investors are satisfied with the performance of hedge funds in 2013,” Amy Bensted, Preqin’s head of hedge fund products, said in a statement.

“Investors are now looking beyond absolute returns; they are also looking for funds to produce strong risk-adjusted returns with low volatility on a consistent basis,” she added. “The performance of hedge funds over 2012 and 2013 has certainly delivered this.”