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Alternative Market Briefing

Early lifecycle hedge funds outperform their established peers by almost 4% p.a.

Tuesday, October 29, 2019

Laxman Pai, Opalesque Asia:

Hedge funds early in their lifecycle are outperforming established managers by almost 4% per annum, said a new report.

However, only half of hedge fund investors would consider evaluating an early lifecycle hedge fund, and even fewer would invest, revealed the report by Preqin produced in partnership with US-based alternatives asset management firm 50 South Capital.

"Early lifecycle managers are outperforming established managers by 3.7% and 4.6% on a three-and five-year annualized basis, respectively," it said.

The outperformance is achieved with just modestly higher risk: standard deviation for early lifecycle managers is only 1.2% and 0.5% higher than for established managers on a three- and five-year basis, respectively.

Early lifecycle managers' annual returns outperformed established managers' every year by almost 4%, the report pointed out.

For this study, a total of 1,591 unique hedge funds across 1,254 unique hedge fund managers were analyzed.

Return data shows outperformance following the financial crisis

Preqin looked at monthly hedge fund returns from 2012 through June 2019 for this study - an arguably mature stage of the industry following the Global Financial Crisis.

Investors have demanded the secretive and opaque asset class become more institutional and transparent. In this flight to safety, dollars allocated to hedge funds have flowed to the industry's largest, and oftenti......................

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