Several hedge fund strategies surprised to the up and downside in 2014 despite conditions suggesting they should do otherwise, according to data from Lyxor.
Although conditions were perfect for event-driven strategies, as a group they lost 2.3% over the year, the asset manager said.
“Strategies with lower market directionality and/or with a quantitative bias should continue to do well in the quarters ahead.”—Lyxor“Event-driven disappointed,” the company said in a report on 2014 asset class performance, “despite the fact that conditions were in place to achieve a strong year, as mergers and acquisitions (M&A) and divesture activity were supportive.”
Totalling $3.5 trillion, M&A activity was up 47% year-on-year, according to Thomson Reuters. 2014 was the sector’s strongest year for deal-making since 2007, the data provider said.
Separately, CTAs outperformed expectations with an overall 18.2% return over the year. Lyxor put this down to the strategy largely ignoring “the views of the crowd”.
One strategy that went with the consensus view was long/short equity. Variable bias ended the year up 1.6%, while market neutral players saw funds up by 7.9%.
This momentum should continue into 2015, Lyxor said: “We believe these strategies with lower market directionality and/or with a quantitative bias should continue to do well in the quarters ahead.”