Tags: Investors | hedge | funds | equity

WSJ: Investors Flock to Hedge Funds, Despite Mediocre Performance

By    |   Wednesday, 23 April 2014 09:58 AM

Hedge funds may be producing lackluster returns, but investors are running to them anyway.

Hedge funds attracted $26.32 billion in the first quarter, the most in almost three years, The Wall Street Journal reports. That lifted overall hedge-fund assets to a record $2.7 trillion.

"Across the spectrum, investors continue to be bullish on hedge funds," Marlin Naidoo, head of Americas capital introduction for Deutsche Bank, tells The Journal.

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"Even on the back of what was a pretty difficult March, we are definitely seeing people look to increase their hedge-fund allocations."

It's not clear why investors are so excited. In 2013, hedge funds returned 9 percent on average after fees, according to industry tracker HFR. Even equity hedge funds returned only 14 percent, compared with a 32.4 percent total return for the S&P 500.

In this year's first quarter, the S&P 500's return again topped hedge funds — 1.8 percent to 1.1 percent. To be sure, hedge funds focused on bonds and alternative investments returned more than 2 percent in the period.

Larry Fink, CEO of BlackRock, the world's biggest money manager, clearly isn't too impressed with hedge funds. He blames them for the recent meltdown in technology stocks.

"Long-term investors have not been spooked by this volatility, but shown remarkable resilience in attitude," he says, according to the Financial Times. "Much of the volatility was fast-money hedge funds repositioning their trades."

Tech stocks suffered the most because of their high valuations and the large positions held in them by just a few hedge funds, Fink notes.

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InvestingAnalysis
Hedge funds may be producing lackluster returns, but investors are running to them anyway.
Investors, hedge, funds, equity
276
2014-58-23
Wednesday, 23 April 2014 09:58 AM
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