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Funds of hedge funds among Q1 2015’s winners

Preqin’s Quarterly Update: Hedge Funds, Q1 2015 analyses the latest industry data and identifies which groups found success over the last three months. 

Funds of Funds

In 2014, the fund of funds sector accumulated assets for the first time since 2011, growing by USD33bn to reach USD819bn in assets across the entire industry. This net growth has continued into 2015, with the sector adding USD8bn in the first quarter of 2015.

Funds of funds have also had a strong start to the year in terms of performance, adding 3.02 per cent over Q1, higher than the Preqin All-Strategies Hedge Fund benchmark, which made gains of 2.88 per cent over the same period. Despite February ending a six-month positive streak for funds of CTAs, their return for Q1 is an impressive 8.50 per cent, with a 12-month return of 31.13 per cent.

Funds of funds have also been very active in terms of their fund search activity over the first quarter of the year; 51 per cent of all searches initiated at the start of 2015 originate from multi-managers.

Sovereign Wealth Funds

The recent clarification of the Volcker Rule terms, that could have forced sovereign wealth funds to redeem their hedge fund investments, represents a victory for sovereign wealth funds and fund managers alike. The rule, scheduled to be implemented in July, among other limits, prohibits hedge fund investment by banks with a US presence, including their controlling entities. Sovereign wealth funds with ownership stakes in banks targeted by the rule will now still be able to invest alongside US investors in hedge funds as long as they are not involved in the marketing of the fund. Prior to this clarification, some fund managers had planned to create new vehicles specifically to accommodate sovereign wealth funds, although this solution could still have led to further regulatory issues.

Europe

Funds that focus on investment in Europe produced lower returns than other regional-focused funds globally in 2014: 3.19 per cent compared with 5.83 per cent for North American funds and 6.20 per cent for Asia-Pacific funds. The region would seem to have turned a corner this quarter however; Preqin’s Europe Hedge Fund benchmark is the top performing region in Q1 2015 and has returned 4.01 per cent so far this year. The European Central Bank began attempts in March to revive the Eurozone’s economy with a EUR1tn program of quantitative easing, the FTSE 100 hit all-time highs and European share prices have been on the rise, all helping to boost performance in the region. 

Within Europe, some firms have had a strong start to the year; for instance, Winton Capital Management has increased its assets from USD28.2bn as of 31 December 2014 to USD30.3bn as of 28 February 2015, an increase of USD2.1bn in the first two months of the year.

Preqin releases quarterly reports covering private equity, hedge funds, infrastructure, real estate and private debt. All five quarterly updates can be accessed for free in our Research Center.

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