Can Absolute Return and Hedge Funds Turn it Around?

Hedge funds have seen their slowest start to the year since the financial crisis in 2008 and yet investors continue to allocate funds to the asset class

Cherry Reynard 23 April, 2014 | 5:05PM

Hedge funds have seen their slowest start to the year since the financial crisis in 2008, according to figures from Preqin, and yet investors continue to allocate funds to the asset class. A similar situation is being seen for the targeted absolute return sector, where returns have been disappointing, but investors continue to invest. What is the likely rationale behind continuing to support a weaker asset class?  

According to Preqin, the average hedge fund has gained just 1.23% in the first quarter, of 2014, the lowest first quarter return since the start of 2008. Areas such as technology and financials have been hit hard, and many funds have been over-exposed to market momentum, which has weakened since the start of the year.

Yet the sector continues to see significant inflows, particularly into equity strategies. Data from eVestment shows that investors allocated $18.3 billion of new capital to hedge funds in March, bringing total net inflows for 2014 to $55.1 billion. Flows into equity strategies were the highest since the second quarter of 2007.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BNY Mellon Real Return A GBP Inc109.90 GBP0.50
SLI Global Absolute Ret Strat Ret Acc73.16 GBP-0.91

About Author

Cherry Reynard

Cherry Reynard  is a financial journalist writing for Morningstar.co.uk.

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