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Emerging funds outperform larger peers in 2021

Friday, June 18, 2021
Opalesque Industry Update - Hedge funds managing less than $1bn averaged gains of 1.4% in May, extending returns for the year to 8.9%. That puts smaller funds ahead of billion-dollar-plus funds, which averaged 1% in May and 6.9% for the year so far, said HFM Insight.

Long/short equity gains have fuelled the outperformance, with the industry's largest strategy by assets and funds up 11.2% among sub-$1bn funds so far this year, compared to 7.7% for those over.

It has been a positive but lopsided start to the year for long/short equity, with early gains in growth and tech stocks before a factor rotation brought gains for longsubdued value names.

Retail traders acting in coordination around GameStop and other stocks have brought turbulence, while equity market gains have limited shorting opportunities.

Alongside long/short equity, event-driven is the standout strategy this year following the renewal in corporate dealmaking and big gains from backing Spac-structures in January and February.

But unlike long/short equity, larger event names are outperforming smaller peers, with $1bn-plus funds up 15.1% year-to-date compared to gains of 10.8% among sub-$1bn funds.

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