Hedge fund trends in 2012

3 Jan

Hedge fund trends tend to change over time – hence why they’re trends! Hedge funds themselves have a long and storied history of changing over time; think of the massive diversification into the internet with the Dot Com boom, and more recently, the newest regulations with the Dodd-Frank Act reshaping traditional hedge funds as we know them.

Recent hedge fund trends are all over the map (and there is no guarantee that these trends will continue), but here is a small selection:

  • Hedge funds in the early part of 2012 have shown a move toward global markets. The fact that hedge funds have a very large global presence, and that there is virtually no limit to what kind of investments can be made inside of a hedge fund portfolio, means that now is the perfect time to invest in emerging global markets.
  • The uber rich have been careful with their assets lately, seemingly looking to protect themselves against margin calls and looming finance changes. Many hedge funds have taken their assets out of funds in the form of cash. Hedge fund portfolios are still going strong, though, with 2012 seeing the best performance in the beginning of a year since 2006.
  • Managed futures are up, as are global macros!
  • Larger funds are seeing larger inflows. Small funds are still mostly experiencing redemptions, but not the kind of net inflows that larger funds are seeing. The number stands as funds with more than one billion dollars in assets receiving 78% of inflows.
  • Hedge funds that beat their ‘peers’ in 2011 had similar results in 2012 – at least thus far. 57% of those peer-beating funds saw net inflows in the first quarter.
  • The trend did seem to be that those hedge funds which saw positive results in 2011 continued to do so into 2012. The majority of large hedge funds saw net inflows in the first quarter of 2012, where 63% of mid-size funds with positive performance in 2011 saw net inflows into 2012.
  • There was a marked trend of investors who discovered their investments had under-performed shifting out of them and heading for seemingly greener pastures. This is usually the case (no investor typically has the patience to “hang around” an under performing fund), but the numbers were higher in the first quarter of 2012.

One of the biggest changes of 2011, leading into 2012, is the continued implementation of the government’s insider trading charges and other legal actions. Some funds have closed, many managers are under investigation, and some funds are doing poorly in general due to the continued investigation and allegations. While it is true that some funds have had a rough year so far, a good portion of funds are seeing decent to good profits on their invested assets. It remains to be seen if these positive trends will continue through the rest of 2012. It is evident to some that in the wake of the Dodd-Frank Act that regulation may begin to increase on hedge fund investments across the globe.

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