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Select hedge fund strategies beat global markets

Less than half of the hedge funds offered in Hong Kong and Singapore have delivered more than 10% over the past three years.

Of 286 hedge funds at least $50m in size, 134 returned more than 10% since September 2011, according to data from FE.

“Performance of hedge funds are not particularly impressive over the past three years, especially when they are compared with the rising equity markets in absolute terms,” said Luke Ng, senior analyst at FE.

Ng said there is a high level of dispersion between the top and bottom performing hedge funds due to levels of leverage and volatility resulting from the different strategies that the managers pursue.

Outperforming funds were those using an event-driven distressed strategy as the global economic recovery supported asset prices and the default rate stayed low, Ng said.

Event-driven strategies also benefited from low financing costs, higher equity market valuations and excess cash on companies’ balance sheets that encouraged M&A activities, he added.

“The outlook for event-driven remains positive as the US interest rate is expected to increase, and that should encourage management to close deals before financing costs are hiked.”

Equity long/short also performed well due to the gains in equity markets and should continue to benefit from the current backdrop, Ng said.

“The global macro environment seems to be improving as the normalisation in the US monetary policy becomes clear. Its diversion with the European Central Bank offers trading opportunities.”


However, hedge funds employing relative value, market neutral, global macro and managed futures strategies underperformed over the past three years.

“This indicates how important manager and strategy selection is in the hedge fund universe.”

Hedge funds globally lagged the world stock index, though in Asia they did slightly better.

Three hedge funds from Atlantic Investment Management were the top performers over the past three years.

Part of the Mark Allen Group.