Hedge funds fail to match US stock market

Statue of liberty USNot one of the 13 hedge fund strategies watched by the Edhec-Risk Institute kept track with the United States stock market in 2012.

The result must present a challenge to hedge fund providers, which are seeking capital for investment vehicles that typically charge much higher fees than other funds.

The top-performing hedge fund strategy in Edhec's list, distressed securities, returned 13.2% in 2012, while the worst-performing strategy, short selling, returned a loss of 19.3%.

In contrast, the S&P 500 index, which investors can access cheaply with a low-cost tracker or exchange-traded fund (ETF), returned 13.4% in 2012.

The good performance of the S&P 500 may yet continue, as the index is already up more than 4% this year.

Not every stock market performed as well as the US in 2012. The FTSE 100 rose 5.8% during the year, less than eight out of the 13 strategies tracked by Edhec.

Hedge Fund Strategies 2012 performance
Convertible Arbitrage 9.2%
CTA Global -2.3%
Distressed Securities 13.2%
Emerging Markets 9.9%
Equity Market Neutral 3.1%
Event Driven 9.6%
Fixed Income Arbitrage 8.8%
Global Macro 3.6%
Long/Short Equity 7.6%
Merger Arbitrage 4.4%
Relative Value 9.2%
Short Selling -19.3%
Funds of Funds 4.3%

 

 

 

 

 

 

 

 

 

 

However, the MSCI World index, which consists of 24 developed-market country indices, returned 13.2% in 2012, equal to the best-performing hedge fund strategy in Edhec's list.

Despite hedge funds' mixed performance, data from US-based Hedge Fund Research, which runs a database of alternative investment vehicles, says hedge fund assets rose to a record $2.25 trillion (€1.7 trillion) in the final quarter of 2012.

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