Fund of Hedge Funds Managers’ Appetite for Hedge Fund Strategies – April 2016

by Jack Ebbs

  • 01 Apr 2016
  • HF

Preqin’s Hedge Fund Online service contains detailed information on the future plans of 391 investors allocating capital to hedge funds over the next year. Despite a year of varied success for the hedge fund industry in 2015, fund of hedge funds managers are actively rebalancing their portfolios and continuing to search for solutions that meet the evolving needs and performance demands of institutional investors. 

Equity strategies remain the most targeted fund type, accounting for 63% of all searches initiated by fund of hedge funds managers in the six-month period between October 2015 and March 2016 on Preqin’s Hedge Fund Online platform. A larger proportion of Europe-based fund of hedge funds managers will invest in equity strategies than their North America-based counterparts (70% vs. 54% respectively).

In anticipation of a more volatile market in the coming year, 42% of searches issued by fund of hedge funds managers target relative value strategy hedge funds. Single-manager relative value strategy funds generated the highest yearly returns of all top-level hedge fund strategies in 2015 (+5.23%), outperforming Preqin’s All Strategies Hedge Fund Benchmark (+1.91%). In particular, the performance of equity market neutral managers stood out, achieving returns of 7.10% over 2015.

Interest in event driven strategies remains high, representing 34% of all funds targeted by fund of hedge funds managers. Despite returning -0.07% in 2015, the strategy accounts for the largest proportion of searches by North America-based fund of hedge funds managers (58%), surpassing Europe-based managers (33%).

Equity strategies are the most targeted fund type by fund of hedge funds managers, despite single manager funds struggling to navigate the volatile market conditions over 2015. However, there are some regional differences, with North America-based fund of hedge funds managers predominantly targeting event driven strategies, while Europe-based managers look to target equity strategies.

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