Improving performance among long/short equity funds in 2013 combined with increasing risk appetite has provided a boost to asset flows into these types of mandates in recent months.
The latest monthly data from Eurekahedge for November shows long/short equity mandates received the largest asset inflows at $1.4bn (£0.8bn), bringing the total asset flows into these strategies to $67.1bn for the year-to-date.
Total assets in long/short equity hedge funds have reached their highest level since 2008, as they crossed the $600bn mark in September. This remains significantly lower than the peak assets under management figure of $756bn recorded pre-financial crisis in October 2007.
In its research note Eurekahedge states: “Given the performance of long/short equities funds this year and in the past few years, as well as increasing demand for proven stockpickers, we expect further allocations to the strategy going forward.”
Meanwhile hedge funds also posted performance-based gains of roughly $8.5bn, boosting assets by almost $10bn during the month. For the year-to-date to October 2013 hedge funds have increased their assets under management by roughly $36bn.
Among the various strategies long/short equity managers posted the strongest returns of 1.71 per cent during October as the funds benefited from the rallying underlying markets, with the Eurekahedge Long Short Equity Hedge Fund index moving 1.82 per cent higher during October, and 11.43 per cent year-to-date. This is followed by multi-strategy managers who gained 1.75 per cent during the month, while fixed income managers posted gains of 1.32 per cent as credit markets eased following the US Federal Reserve’s postponement its tapering plan.
However, on a year-to-date basis distressed debt and long/short equity strategies are the best performers with returns of 12.18 per cent and 11.43 per cent respectively.
With macro conditions appearing to improve globally this is being reflected in the performance of long/short equity mandates, although there does seem to be some disconnection between some regions economic performance and long/short equity performance, such as the US and Japan.
In terms of regional performance strategies run by Asia ex-Japan managers delivered the best performance, up 2.40 per cent during the month and 10.98 per cent year-to-date, with Eurekahedge citing improvements in Chinese PMI data boosting market sentiment during the latter half of the month.
North American managers gained 1.9 per cent in October, which underperformed the S&P 500 index.
Nyree Stewart is deputy features editor at Investment Adviser