Hedge funds have suffered their worst start to the year in performance terms since the financial crisis, as returns in March and January were both in the red after a volatile quarter for equities, new data reveal.
Positive returns in the first quarter of the year have been harder to come by for the hedge fund managers, which make risky bets so they can make money whether a market rises or falls, as tensions between Russia and the West have flared and developed stock markets are down year to date.
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On average, hedge funds posted gains of 1.23 percent, in contrast to gains of 6 percent and 3.7 percent over the same periods in 2012 and 2013 respectively. The returns seen in Q1 of this year also lag fourth-quarter returns in 2013 by more than two and a half percentage points, according to the study by hedge fund data provider Preqin.
The gains for the first three months of the year were driven by February, which saw returns of 1.75 percent offsetting the disappointing performance of January and March.
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Many of the largest hedge fund firms, such as Blue Ridge Capital, Viking Global Investors and Lone Pine Capital suffered stinging losses in March as technology stocks saw sharp declines.
Event-driven strategies posted impressive results, continuing their strong performance run as global political tensions and macro events also dominated the headlines worldwide.
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Head of hedge funds products at Preqin, Amy Bensted said despite the volatile start to the year, investors look set to stay the course with hedge funds in the short term.
"The industry will be waiting to see how the second quarter of the year unfolds, not only in terms of performance, but also in how investors and fund managers react to the changing market conditions both in terms of new capital flowing into the asset class, and what funds pick up these inflows," she said.