Strategy in Focus: Long/Short Equity Hedge Funds

Equity long/short hedge funds have performed well in the most recent market cycle, but much of those gains have been market driven as funds have struggled to add alpha.

• Equity hedge strategies have been a major source of net-hedge-funds redemptions for much of the past decade

• Over this period, the segment’s market exposure has driven returns higher while muting the downside, but low beta may not be all investors want from their long/short equity hedge funds

• While returns have been overall positive in the most recent market cycle, long/short equity hedge funds have struggled to add alpha, significantly impairing their value add