Alternatives data provider, Preqin, has published its Hedge Funds Q4 2023: Preqin Quarterly Update report which finds that equity strategies were the best performing core hedge fund strategy in Q4 2023 and for the year, returning 7.2 per cent and 13.4 per cent to investors, respectively.
Event driven funds were the second highest performer during Q4 2023 (6.7 per cent) as well throughout 2023 (10.4 per cent). The strategy ticked up by catching a tailwind from M&A activity late in the year.
North America-focused hedge funds outperformed those focused on Europe and APAC, cumulatively returning 7.6 per cent in Q4 2023. Europe-focused hedge funds cumulatively returned 5.1 per cent in the fourth quarter, while APAC-focused hedge funds returned 2.5 per cent.
Multi-strategy and credit fund launches rose in the fourth quarter of 2023. The former made up 25 per cent of all fund launches in the quarter, up from 11 per cent in the third quarter of 2023. Credit-focused funds launches rose in proportion of all fund-starts (18 per cent) in the fourth quarter compared to Q3 (11 per cent) as central banks indicated that the end of the rate-hiking cycle could be approaching.
Charles McGrath, AVP, Research Insights at Preqin says: “Hedge funds investors have reason to be optimistic about 2024 if rate cuts do materialise, but with some caution. Increases in both risk and correlation to public markets, particularly among equity strategies, is something to consider. This level of risk is concerning in that it has risen disproportionately to returns, impacting risk-adjusted returns, a key pillar of hedge funds’ place in the larger portfolio.”