Our industry

The alternative investment community is renowned for its wide range of innovative strategies and trading techniques. Equity hedge, utilising both long and short positioning, is the founding strategy of the hedge fund industry and its origins can be traced back to 1949. While equity hedge continues to attract investors, other trading styles have evolved with the passage of time. Consequently, the range has expanded to include the likes of managed futures, global macro, relative value, event driven, new alternatives and emerging markets.

The high liquidity and exceptional diversification potential of managed futures funds continues to ensure their popularity, with assets under management rising from $41 billion in 2001 to over $291 billion as of Q1 2011 (according to research conducted by Barclay Hedge).

Like most other asset classes, the growth in hedge fund assets reversed sharply in the second half of 2008 as the credit crisis led to a broader failure of confidence in financial markets, triggering a massive flight to the safety of cash and government bonds. However, hedge fund assets under management began to recover in 2009 and the industry saw strong inflows of $22.6 billion in 2010 and $10.1 billion in the first quarter of 2011 alone (source: Hedge Index).

The number of hedge funds in existence remains some way below its peak (source: HFR year-end report 2010) which demonstrates that the events of 2008 acted as a form of quality control with many weaker hedge funds folding. As a consequence, the future industry will be shaped by tighter regulation, improved governance, higher operational standards, greater transparency and more astute investment management.

Growing recognition of the importance of building robust investment portfolios, and increasing awareness of the limited diversification opportunities available through traditional asset classes is encouraging greater investment in hedge funds. More recently, regulatory directives such as UCITS have allowed increasing numbers of investors to take advantage of the efficient risk dispersion and multiple sources of return that many hedge fund strategies are able to provide.