Hedge funds: Black sheep no more?
Research by Momentum Global Investment Management suggests that investor appetite for hedge funds has to a large extent returned following the debacle after Lehman Brothers collapsed.
Hedge funds, and by extension hedge funds of funds, have endured persistently bad press post the 2008 collapse of Lehman Brothers, Momentum said.
Yet it found data from index provider Hedge Fund Research (HFR) suggesting that the industry has stabilised. Its research found that:
• Hedge funds are still attracting capital
• Hedge funds remain a tiny part of the financial market
• Returns for the industry are attractive from both an absolute and portfolio perspective
• Correlation to equities has increased post 2008, but is likely to decrease in the future
• Hedge fund investing exposes investors to a unique set of risk factors
• Small, new managers tends to outperform large old managers
• Hedge funds of funds who managed capital successfully through 2008 and with a track record of investing in smaller managers are still a viable investment solution
John Caulfield, CIO of Alternative Strategies for Momentum, said: “Demand for hedge fund’s remains robust. Assets are back to their pre-Lehman peaks of approximately €2trn. Although the trend is definitely one of the big getting bigger, large funds account for approximately 3% of the universe by number but control approximately 85% of assets. This is despite overwhelming evidence showing small, new funds outperform large old funds.”
Momentum also found that whilst hedge funds have always been vulnerable to systemic events when compared to equities, they tend to have shallower, shorter lived drawdowns with stronger recoveries relative to the initial loss.
To read the full research report click here: [asset_library_tag 5452,Alternative Strategies Research]