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Kepler Absolute Hedge publishes Absolute Market Intelligence Report for Q1 2024

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Research firm focused on Alternative UCITS funds, Kepler Absolute Hedge, has published its Market Intelligence Report for Q1 2024. The report is designed to give Absolute Hedge’s readership base of professional allocators and UCITS fund managers a holistic view of the latest trends in the Alternative UCITS universe.

The firm writes that the report, produced on a quarterly basis by Kepler’s in-house research team, uses data from Absolute Hedge to shed light on how the popularity of different strategies is evolving within the allocator community, as well as tracking AUM, fund flows and performance.

Matthew Barrett, Partner and Head of Manager Research at Kepler Partners, says: “Following a somewhat difficult period for the Alternative UCITS universe in recent quarters, green shoots are emerging and the backdrop for hedge fund strategies remains compelling. Though Q1 saw a further contraction in AUM, the pace of outflows has slowed and some strategy cohorts, including Credit, Managed Futures and Volatility Arbitrage, are growing. Q1 performance has also been strong across the industry; the AH Global Index achieved positive performance for its fifth consecutive quarter, with Managed Futures a particular bright spot.

AUM and flows

Overall alternative UCITS industry AUM fell by USD7.5 billion (3 per cent) during Q1 to USD236 billion. In absolute terms, redemptions were largely concentrated, with Multi Asset/Macro funds accounting for -USD3.5 billion (47 per cent) of the drop and Event Driven managers accounting for -USD1.7 billion. Within these strategies, a handful of ‘bellwether’ funds experienced most of these outflows, with several relevant closures.

However, some strategies saw their AUM grow during Q1, including Credit, Managed Futures and Volatility Arbitrage, driven by a combination of positive performance and robust investor demand.

The market backdrop for new launches remains challenging, the firm writes, with relatively subdued launch activity in Q1; only three new funds came to market during the quarter.

Performance

Q1 saw a positive start to the year for Alternative UCITS performance. Buoyed by ongoing economic resilience and strong earnings releases, particularly within the technology sector, risk assets performed well during the first quarter. Absolute return strategies saw strong performance against this backdrop, with the AH Global Index returning 2.9 per cent. This marks the index’s fifth consecutive positive quarter.

Systemic strategies stood out in performance terms with seven of the 10 top performing funds falling into this category. Growth-oriented equity specialists were also well-positioned as they capitalised on the AI-driven rally. The AH Managed Futures Index also experienced its best Q1 performance on record (+7.9 per cent).

On the negative side, ESG exposures were again core drivers of underperformance, while some macro managers incurred losses from wrongfooted positioning (short equities and/or long duration).

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