Hedge funds post average Q2 2014 returns of 2.51% compared to the 1.30% average returns seen throughout the first quarter, according to Prequin.
Improved performance in May and June has provided a more positive outlook for the hedge fund industry following the worst start to a year since 2008.
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Second quarter performance was almost twice as strong on average compared to Q1 2014, taking year-to-date (YTD) returns to 3.86%.
The hedge fund benchmark is behind the 4.28% YTD returns as of the end of Q2 2013, and investors may be expressing concerns that three of the six months in 2014 so far have seen negative average returns.
Other Key Facts:
- Event Driven Strategies continue to lead the way with 5.24% returns on average for 2014 YTD. Event driven strategies were included in 20% of investor searches in Q2, making it the second most searched for fund type after long/short equity.
- Macro Strategies recovered from a poor Q1 to be the top performing strategy benchmark in Q2, with average returns of 2.80%. This is the first time the benchmark has been the top performing strategy since Q3 2011.
- CTAs represented just 1% of all fund launches in Q2 2014, and the proportion of investor searches including these funds was down from 16% in Q1 to 10% in Q2 following sustained poor performance. However, CTAs performed better in Q2 2014 with three positive months and average returns of 2.15%.
- After being the worst performing regional benchmark in Q1, Emerging Markets was the best performing region in Q2 with average returns of 4.33%.
- North America is the leading regional benchmark YTD (+6.02%) following further strong performance in Q2 (+2.95%). Sixty-six percent of all fund launches and 46% of all investor searches during the quarter were from firms based in North America.
- Despite good performance in Q1, Europe was the worst performing regional benchmark in Q2 with funds focused on the region posting an average of 0.50%.
- There was an increased proportion of investors searching for Funds of Hedge Funds in Q2 2014; 29% of searches included commingled funds of hedge funds (up from 21% in Q1) and 10% were targeting managed account funds of hedge funds.
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