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The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Hedge fund returns up, flows down
In a new study, UK-based research group Aurum says the overall hedge fund market spawned the best returns last year since the first post global financial crash year of 2009.
Aggregate returns of the more than 3,340 hedge funds in the Aurum database amounted to 11.3 per cent on an “asset-weighted basis” compared to a “mean figure” of 10.3 per cent, implying larger managers outperformed.
“Multi-strategy was the strongest performing strategy returning 13.6 per cent on an asset-weighted basis,” the report says. “Equity long/short delivered similar strong performance of 13.5 per cent – also outperforming the [Hedge Fund] Composite figure, which was dragged down by underperformance from long biased, quant, event, credit, macro and arbitrage strategies.”
The analysis found the six of the 10 best-performing ‘sub-strategies’ – the researcher tracks 37 – of 2023 also appeared in the 2024 charts.
“On the other end of the scale, it was a similar picture,” the Aurum study says, with two of the five-worst sub-categories of 2023 also bottom-dwellers last year in a list that includes two arbitrage strategies (tail-risk and volatility), quantitative managed futures and long commodities.
“It’s worth noting, in this strong year for hedge fund performance, that only one sub-strategy had negative returns for the year; arb – tail (-2.9 per cent).”
Despite the relatively upbeat returns for hedge funds last year, the sector failed to generate much enthusiasm from investors with all strategies bar arbitrage (one of the worst-performing) clocking-up net outflows in 2024.
“Industry assets have seen net outflows from redemptions,” the study says. “However, total hedge fund industry assets have risen moderately due to positive P&L generation… that has primarily been driven by equity [long/short] and multi-strategy with other contributions coming from all other strategies.”
Hedge fund assets as measured by Aurum totalled about US$3.1 trillion as at the end of December 2024, continuing a more-or-less flat trend of the last four year where the sector has ranged between just below US$3 trillion to a peak of almost US$3.5 trillion.
Over the five-year period, hedge funds have returned an annualised 6.8 per cent “markedly outperforming” the -2 per cent for bonds.
While the hedge fund sector five-year result lags equities (7.7 per cent) on a headline basis, it beats the share market “from a risk-adjusted perspective”, Aurum notes.
