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Alternative Market Briefing

Study finds new hedge fund managers offer potential for greater returns

Thursday, November 28, 2013

Beverly Chandler, Opalesque London for New Managers:

The latest Hedge Fund Spotlight from Preqin examines emerging hedge fund managers and finds that hedge funds launched by new managers offer the potential for greater returns. The firm says that first-time funds on average post better returns than funds launched by established firms, but institutional investor interest in emerging managers continues to decline.

Preqin’s figures reveal that the average emerging manager long/short fund launched since 2007 delivered annualized net returns of 8.80% in its first three years of trading, compared with an annual rate of 5.38% from newly-launched funds managed by established firms.

However, first-time funds exhibit more volatility than funds managed by experienced firms. The average annualized volatility of returns during the three years following inception were approximately 14.7% for established manager long/short funds compared with 17.3% for emerging manager long/short funds.

Other key facts to emerge from the study include:

  • 22% of emerging manager funds launched since 2007 made a loss in their first year of trading, compared to 26% of funds launch ed by established managers.
  • However, emerging managers that suffered a loss in the first year tended to experience larger declines. Over a quarter of loss-making emerging manager funds pos......................

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