ASSET RAISING BETTER, INCREASINGLY FOCUSED ON ALPHA
Brett Yarkon and Jack Seibald, of Cowen Prime Services, assess the reasons for the renewed interest from allocators in utilizing hedge funds as risk diversification tools
(Reprinted with permission from HFMweek)
Hedge fund returns are relatively strong this year for the first time since 2013. Following three consecutive years of disappointing results that alternated between fractional gains and losses, long/short equity funds are tracking high single digit gains thus far in 2017. Also, equity markets globally have marched higher all year, almost without interruption, and are now up about mid-teens on a total return basis. Thusly, hedge fund performance is again attracting the attention of allocators.
This is in stark contrast to what we witnessed last year. After a difficult start to hedge fund performance in 2016, many institutional investors reduced their exposure to the long/short asset class. This was particularly noticeable among single and multi-family offices, as the continued relative under-performance from hedge fund investments among this investor class, combined with the month-to-month observed volatility, shift ed their investment focus to longer lockup structures. Among fund of fund (FOF) investors, we noticed efforts to rejigger allocations to eliminate “disguised beta” managers as well as those who failed to demonstrate the ability to opportunistically manage portfolios.
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