In Q4 2013 the alternative UCITS sector grew by 21 per cent compared to Q4 2012, showing continued demand and investment in alternative strategies, according to the Alceda Quarterly UCITS Review.
Strong equity markets, rallying into the year end, supported the demand for alternative UCITS strategies and drove the Q4 performance up 2.7 per cent, bringing year to date gains to six per cent.
Tracking the Absolute Hedge Alternative UCITS Index, which encompasses 468 funds, assets under management (AUM) reached a total of EUR159.4bn, an increase in AUM of 3.2 per cent on the previous quarter.
As equity markets continued their strong performance in the last quarter of the year, the AH Equity Long Short Index kept its position as the top performing strategy in the year with a 12.3 per cent increase over 2013, following the 4.3 per cent uplift in Q4 2013. In addition, AUM within Equity Long Short reached EUR 18.4bn, registering a 17.2 per cent increase over the quarter. FX strategies were hard hit with both gains and assets declining 15.4 per cent and 33.3 per cent, respectively, in Q4 2013, leading to an overall decline in performance of 1.3 per cent in 2013.
Managed Futures funds, which declined 2.4 per cent in Q3 2013, rebounded in the last quarter adding 6.1 per cent, making it the best performing category in the quarter; however AUM declined 3.2 per cent over the quarter showing the strategy is still facing some challenges.
Macro funds control the largest share of total AUM with EUR 42.4 billion invested, with assets growing by 6 per cent over Q4 2013. The AH Macro Index advanced 1.4 per cent in Q4 2013 and 2.3 per cent over the year.
Q4 2013 was a particularly active quarter with regards new alternative UCITS launches, with 17 new funds across strategies coming to market, primarily within the Equity Long Short and Credit Indices. The AH Credit Index ended the year with gains up 3.37 per cent (+1.23 per cent in Q4 2013) as investors reacted to the dislocation of bond markets. In line the new issues across strategies, the report reveals that investors are increasingly happy to support new products with new funds achieving significantly higher launch assets, often within their first year.
Michael Sanders, chairman of the board, Alceda Fund Management SA, says: “The results of the Alceda UCITS Review in Q4 2013, and over the full year, demonstrate the growing investor confidence in the global economic recovery and the continued demand for alternative UCITS strategies.
“While the overall results were encouraging, there was a significant dispersion in performance between the best and worst performing funds in the space. Equity Long Short, the strongest performing category over the year, outperformed FX strategies by over 60 per cent, demonstrating the importance of good fund selection and portfolio diversification. Assuming equity markets continue to rally, we expect Equity Long Short funds to benefit and maintain their levels of performance.
“The universe saw assets under management grow by over EUR25bn over 2013, translating to a growth rate of 21 per cent. With investor confidence growing, and more funds being driven into alternative UCITS strategies, as well as a supportive regulatory environment, we expect this positive trend to continue into 2014.”