Global Investors Keen on Hedge Funds in Second Half

Twenty percent of respondents expressed an appetite for emerging market equities, up to 28% of investors in the Americas.

Global macrocontinued to lose favor with investors, after being one of the three most sought-after strategies at the beginning of 2013. The main interest came from EMEA-based investors.

Investors remained bearish on CTA/managed futures, with a negative net demand of 17% globally. Credit Suisse said this forecasted possible redemptions in the second half.

Return to Form

After a juddering start to the year, hedge fund investors had some reason to feel optimistic going into the second half.

Preqin, an alternative investments data provider, reported Wednesday that hedge funds finished the first half up 3.9%, compared with a 4.3% return in the same period a year earlier.

The report said good performance in May and June resulted in a second quarter gain of 2.5%, which was an improvement on the first quarter return of 1.3%—the hedge fund sector’s worst yearly start since 2008.

“Despite the relatively volatile start to the year, investors are continuing to allocate to hedge funds and a healthy number of new searches and mandates were issued during the second quarter,” Amy Bensted, Preqin’s head of hedge fund products, said in a statement.

“Hedge fund managers will be hoping to build on more encouraging performance in May and June in order to continue attracting inflows from the institutional community.”

Pointing to strong second quarter results posted by emerging markets and macro strategy funds, Bensted said “it will be interesting to see if managers of these vehicles can continue to outperform the likes of event-driven strategies and the North America market going forward.”

Preqin reported these other key facts:

• Event-driven strategies, which returned5.2% on average in the first half, were included in 20% of investor searches in Q2, second only to long/short equity
• Macro strategiesrecovered from a dismal Q1 performance to be the top performing strategy in Q2, with average returns of 2.8%
• CTAsrepresented just 1% of all fund launches in Q2, with the proportion of investor searches including these vehicles down from 16% in Q1 to 10% in Q2 following sustained poor performance
• Emerging markets rebounded after being the worst performing regional benchmark in Q1 to being the best performing region in Q2, with average returns of 4.3%
• 66% of all fund launches and 46% of all investor searches during Q2 were from firms based in North America, the leading regional benchmark this year to date, up 6%

• Europe was the worst performing regional benchmark in Q2, with funds focused on the region posting an average return of 0.5%.
• Funds of hedge funds saw an increased proportion of investor searches in Q2: 29% of searches, up from 21% in Q1, with 10% targeting managed account funds of hedge funds.