The first half of 2014 saw a new milestone reached in the alternative UCITS sector with assets under management (AUM) growing by 15.6 per cent to EUR184.2 billion, according to the Alceda Half Yearly UCITS Review.
However, alternative UCITS strategies performed less well during the first half of 2014, advancing just 0.52 per cent, compared to the 5.95 per cent gains seen in 2013.
Having ended 2013 as the best performing strategy with 12.3 per cent gains, the AH Equity Long Short Index was flat to the end of June 2014, underperforming most long-only equity indices. Despite this, equity long short strategies have seen assets under management rise 66.8 per cent to EUR30.7 billion since the end of last year. Similarly event driven strategies have seen assets under management increase 88.2 per cent to EUR3.2 billion over the period, as global M&A volumes increase.
Strong performance in equity and bond markets, both up by four per cent in the first half of the year, contributed to multi asset strategies being the best performing alternative UCITS strategy year to date, with 3.52 per cent gains in line with its strong performance in 2013.
Managed futures was the only strategy to lose assets, declining 6.7 per cent in H1 2014. However, performance has generally improved and is showing tentative signs of investors re-examining the sector after a challenging couple of years.
The first half of 2014 saw a healthy pipeline of new alternative UCITS launches with 16 new funds across strategies coming to market, but particularly equity long short strategies. The attractiveness of the UCITS brand globally has seen several well-known US hedge funds managers launching UCITS versions of their flagship funds.
The report highlights how an increasing number of funds are acting to limit capacity after seeing strong inflows over the last couple of years. The results show that six per cent of funds in the sector are now limiting capacity, which account for 13.6 per cent of total assets under management.
Michael Sanders, chief executive and chairman of the board, Alceda Fund Management SA, says: “These results show the continued popularity and demand for alternative UCITS strategies globally. Investment flexibility, demand for absolute return solutions and profound changes in the hedge fund industry and supportive regulatory framework are driving this expansion over the long-term.
“April was a particularly difficult month for equity long short managers, as despite relatively nominal moves at the index level, there were significant underlying style rotations and unwinding of consensus positions which hurt active managers. There is also an issue of capacity which is most acute in equity long short where 48 per cent of AUM is currently invested in closed funds. We believe that this is compelling evidence of the strong demand for high quality alternative UCITS products and should encourage managers to launch further strategies in UCITS format.
“With fund selectors and institutional investors gaining confidence, and more funds being driven into alternative UCITS strategies we anticipate the growing demand for alternative UCITS strategies to continue to expand and gain popularity during 2014.”