Long/Short Hedge Fund Back in Demand

The Eurekahedge index rose 1.79 per cent in August as 72 per cent of constituent funds posted positive returns. More than 20% of hedge-fund managers generated double-digit returns in the first eight months of the year.

A survey of about 300 attendees for the hedge-fund investor event Gaining The Edge found that 65 per cent of respondents were interested in funds using a long/short strategy.

“ Long/short equity has been losing market share for a number of years in the hedge-fund industry and this data suggests a potential reversal of that trend.”

Hedge-fund consultancy Agecroft Partners.

A long/short strategy is an approach where funds buy under-priced shares for the long term while short selling overpriced shares.

Investors also showed a willingness to invest in smaller and newer funds. Some 23 per cent would consider funds smaller than $100m, while 32 per cent said they they would invest in funds between $100m and $1bn in size. Only 4 per cent said they would only invest in funds larger than $1bn.

Agecroft said that institutional investors may be willing to invest in smaller hedge funds because they have dedicated more resources to researching alternative investment managers.

Reference:

Financial News, 2020-09-10, “Hedge Funds deliver their best five-month performance since the financial crisis – here’s the strategy that’s worked for them”