(January 9, 2014) — Hedge funds recorded their best performance in three years in 2013, largely due to the strong equity market, ending the year with a 9.2% return, eVestment has found.
Funds heavily invested in equities returned more than double those in credit and triple those with diversified market exposures. Such success pushed the asset class’ total assets under management to a five-year high of $2.8 trillion. The report found inflows of $75 billion in 2013.
Preqin’s November survey of hedge fund returns was also testament to the industry’s growth and success. More than 20% of institutional investors said hedge fund returns exceeded their expectations in 2013, and 63% said their expectations had been met.
Despite these overall strong outcomes, Bridgewater Associates’ All Weather fund lagged behind, closing the year down 3.9%, according to The New York Times. Underperformance could be attributed to the impact on the $70 billion fund by the rise in treasury yields last summer.
The bond-heavy portfolio, however, boasted steady returns of 12.4% over the last five years and maintained its clients’ confidence and trust: “All Weather is a highly disciplined investment process based on risk parity principles. We can argue about the investment theory behind it, but not about the integrity and robustness of the process discipline,” a client told aiCIO for the 2013 Risk Parity Investment Survey.
eVestment found activist hedge funds garnered the highest returns of 19.1%, compared to 15.2% in 2012. Developed market funds also outperformed emerging markets by nearly 8% in 2013, in sync with the bull developed equity market.
Credit strategies, though recording a positive 2013 return of 6.26%, posted their third lowest return since 1998, largely due to “directional credit strategies underperforming in the second half of the year,” the report found.
Macro and managed futures continued to show poor performance, producing 2.17% and a loss of 0.61% in returns respectively.
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