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Kepler Absolute Hedge publishes Absolute Market Intelligence Report for Q4 2023

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Kepler Absolute Hedge has published its Market Intelligence Report for Q4 2023. The authors write that the report gives Absolute Hedge’s readership base of professional allocators and UCITS fund managers a holistic view of the latest trends in the Alternative UCITS universe.

Matthew Barrett, Partner and Head of Manager Research at Kepler Partners, says: “2023 presented a mixed picture for the Alternative UCITS sector; the flows backdrop was challenging, with outflows across all strategies, however some individual funds garnered significant inflows, and there were several successful new fund launches.

“We have tracked the Alternative UCITS sector since its infancy, and what we see today marks the ongoing maturation of the asset class as it continues to offer investors attractive diversification opportunities amid market turbulence.”

Though 2023 saw significant outflows of USD38 billion, spread across most Alternative UCITS strategies, these stabilised in the fourth quarter to around -USD2 billion or -0.7 per cent. The largest redemptions were experienced in Multi Strategy and Macro strategies, which saw outflows of USD7.8 billion and USD 7.6 billion respectively., the firm says. Conversely, resilient investor demand for Managed Futures and Volatility Arbitrage meant that these strategies remained largely immune to the broader trend of outflows, whilst areas such as catastrophe bond funds saw significant inflows.

New launch activity also increased, according to the report, with 11 funds entering the market in H2 2023, and positive momentum is expected to continue in 2024 with several high-calibre managers planning to launch UCITS vehicles.

Alternative UCITS funds delivered strong performance in 2023, with Absolute Hedge’s Global Index finishing the year up 4.3 per cent – the third best year of returns since Kepler created the index in 2010. Beta-orientated strategies such as Credit drove this strong performance, whilst uncorrelated strategies such as Managed Futures delivered subdued returns given market turbulence. Looking by fund, strong performers included TMT/Growth Equity funds, Short Volatility and Credit, whereas exposures to China and ESG were core drivers of underperformance, the report says.

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