There's more to hedge fund performance than stellar returns, Amy Bensted said.

Most hedge funds last year fell short of returns achieved in 2013, according to a report released Thursday by Preqin, an alternatives data provider.

Preqin’s All-Strategies Hedge Fund benchmark gained 3.8% in 2014, compared with a gain of 12.3% the previous year.

This was the lowest annual return since the benchmark lost 1.9% in 2011.

Preqin said in a statement that solid advances were often followed by losses as managers struggled to gain momentum.

The 2014 performance picture was more complex than the benchmark figure suggests, however.

Preqin data showed that all core strategies delivered gains sufficient to satisfy absolute return investors.

According to Preqin, 57% of investors it polled felt that hedge funds had at least met their expectations for the year, and 8% said they had exceeded expectations.

‘Underwhelming’

Only 13% of hedge funds met or exceeded the Preqin All-Strategies Hedge Fund benchmark return of 12.3% in 2013.

The benchmark experienced six monthly losses in 2014. The first quarter was the worst start to a year for performance since 2008, and the third quarter was the first negative one for the benchmark since the second quarter of 2012.

CTA funds reported an average return of 10% last year, leading the hedge fund benchmark by more than six percentage points for their strongest year since 2010.

Credit strategies were the best-performing core strategy in 2014, with average returns of 5.6%.

Value-oriented equity was the top-performing focused strategy, returning 12.1% over the year. Mortgage- and asset-backed lending strategies also were strong performing focused strategies, posting returns of 9.5% and 9.3%, respectively.

North America was the top regional benchmark, gaining 5.8% over the year and switching places with the 2013 best-performing region, Asia/Pacific, which was up 5.5%.

“After a solid year of returns in 2013, the performance of hedge funds in 2014 was widely seen as underwhelming,” Preqin’s head of hedge fund products, Amy Bensted, said in a statement.

“The returns of some funds, including those employing asset-backed and mortgage-backed strategies, were more impressive, and others, such as commodities and emerging markets-focused funds, provided a hedge against poor performance in related public markets.”

Bensted said that despite the harsh light cast on the hedge funds by the high-profile exits from the sector of CalPERS and PFZW, the Dutch health care sector pension, the vast majority of institutional investors worldwide remain committed to hedge funds.

“Preqin’s latest poll of investors found that many thought hedge funds met or exceeded expectations throughout 2014, and although performance sticks out as a key issue going into 2015, both investors and fund managers remain upbeat,” she said.

Key features of hedge funds, such as diversification, low volatility and protection against significant market downturns are expected to hold true and continue to attract investors, she said.