Tuesday, 31 August 2010

Best Performing Hedge Fund Strategy in Next 6 Months - Poll Results

For most of this month a poll has been running for visitors to vote for what they see as the best performing strategy over the next six months. The strategy range was taken fron the Dow Jones Credit Suisse Hedge Fund Indices, and the results were, in order of votes (percentage of votes) and YTD return:

CB Arbitrage 0 (0%), 4.92%

Emerging Markets 0 (0%), 2.69%

Equity Market Neutral 2 (7%), -2.95%

Event Driven 7 (25%), 3.43%

Fixed Income Arbitrage 4 (14%), 6.79%

Global Macro 5 (18%), 4.88%

Equity Long/Short 3 (11%), -0.77%

Managed Futures 4 (14%), -1.24%

Multi-Strategy 2 (7%), 2.15%

Although it would be easy to suggest that the poll results reflect only the performance of the first seven months of the year, as three of the top four performing strategies YTD were selected as expected to be the best over the next six months, that is not the whole story. 
It is pleasing to see some contrarianism amongst the readership - managed futures, by now long overdue for some solid absolute returns, attracted more votes than multi-strategy and equity long/short.

As always, even with vox pop forecasting, there is some insight in it. The hedge fund investment strategy most commonly expected to out-perform the others in the next six months is the event-driven category (distressed, risk abitrage and multi-strategy) .  It is no coincidence that that is the strategy that is mentioned by investors in hedge funds when they are asked by marketers and pollsters where they are currently looking for managers. 

Does this mean investors in hedge funds don't believe that the US economy is in the process of double-dipping? The change in prices of distressed securities are negatively correlated with the economic cycle with a lag, and risk abitrage deal volumes are a function of the capital markets cycles.   

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