Hedge Funds Off to Slowest Annual Start Since 2008

Long/short equities strategies remain favorites among investors as 2014 gets underway, according to Preqin.

(April 21, 2014) – A cooling equities market has dampened hedge fund performance over the last few months, Preqin data showed, making 2014’s opening quarter the worst since 2008. 

The data firm’s global hedge fund benchmark rose 1.23% for the year-to-date. Its performance has closely tracked the S&P 500, which rose 1.3%.

At this point last year, the industry had gained 3.76%. In the opening quarter of 2012, it was up 6.07%.

“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,” said Amy Bensted, Preqin’s head of hedge fund products.

Event-driven strategies have performed well relative to their peers, she noted, closing the first quarter up 2.94%. Long/short funds, in comparison, gained just more than 1%. 

Still, long/short equities hedge funds remain on top for investor interest. Nearly 70% of manager searches since January included this strategy, while event-driven funds represented 21%.

Emerging markets-focused funds had one of the worst opening quarters of any strategy, but still closed with no losses at roughly 0% net returns. 

The weak opening months haven’t sealed funds’ fates, according to Bensted.

“The industry will be waiting to see how the second quarter of the year unfolds,” she said, “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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