01/2/2010
By Sophie Baker
Research by global consulting and outsourcing company, Hewitt Associates, shows that hedge funds fared well in 2009, with hedge fund manager searches doubling over the year.
The asset class has posted its strongest returns in over a decade, and found that while the industry was hit be redemptions from investors between late 2008 and early 2009, broad-based hedge fund indices were actually up by around 20 per cent during 2009.
"The industry now seems to have put the worst behind it, and assets have started to grow again due to a combination of performance and net capital inflows," explained Guy Sainfiet, senior hedge fund researcher at Hewitt Associates. "The number of new fund launches also increased."
Sainfiet said that following the redemptions from leveraged and short-term investors in 2008 and early 2009, hedge funds have come to realise that they need a more stable investor base.
"Pension funds are natural and ideal long-term investors for hedge funds but require certain institutional standards to which many hedge funds did not adhere. As a result, hedge fund managers have started to address these shortcomings, by, for instance, increasing transparency and employing a third-party administrator. Hewitt welcomes this move and we have been instrumental in guiding a number of managers towards industry best practice."
Distressed Investing was one of the top performing hedge fund strategies in 2009, which invests in securities of companies that are either already in default of lending covenants, under bankruptcy protection, or in distress and heading that way.
And 2010 is set to be a good year for hedge funds too. "Our expectation, based on the amount of interest from UK pension plan trustees, is that 2010 will be another very active year for pension funds allocating capital to hedge funds," added Sainfiet.
