Hedge Fund Recovery Nearly Complete
Hedge Funds are on the brink of reaching their performance highs, a feat that appeared to be quite a long shot in the depths of the recent financial crisis. As of October 26, 2009 the average fund needed to gain only 2 percent to get back to its value as of June 30, 2007, the height of the last market boom. On average, hedge funds have returned 18.3 percent this year. Hedge fund indexes are projecting that in late November the industry will return to its high of two years ago.1
Since the beginning of the year, analysts at BHA have noticed an increase in the number of investors looking to allocate to hedge funds. From June through October, there were approximately 150 more investors allocating to hedge funds than there were during the first five months of the year. This increase is directly related to hedge funds’ improved performance.
Although hedge funds’ returns are on the rise, investors are still most interested in funds that provide liquidity. Among the investors BHA has profiled, the strategies that have generated the most interest are long/short equity, global macro, CTA/managed futures, credit, and distressed debt.
A European wealth advisory firm was wary about the market during the first half of the year and put its alternative investments on hold. However, now that the hedge fund market is improving, the firm wants to add a couple of CTA/managed futures managers before the end of the year.
BHA analysts will continue to track the correlation between hedge fund returns and the number of investors seeking opportunity in the hedge fund space.
1 http://online.wsj.com/article/SB125651608549607185.html