Hedge funds have not kept their promises. According to the Lyxor index, they ended 2014 with a slight decline (-0.2%) worldwide. This poor score is partly due to the underperformance of funds specialising in corporate transactions (mergers and acquisitions, share buybacks, etc.). Brilliant in the first half of the year (they were still earning 4.5% at the end of June), these strategies, which represent nearly 30% of hedge fund assets, were reversed in the last quarter, when the Obama administration changed the tax rules for American companies buying up foreign companies, leading to the cancellation of some previously announced acquisitions.
These funds, which had collected a lot in the past two years, ended the year in red (-2.3%). “But since 2002, they have never experienced two successive negative years. And the environment remains favourable for them for 2015”, says Philippe Ferreira, head of research at Lyxor.
Deception also for hedge funds invested in high yield bonds. “Oil companies, which represent 17% of the coast, have been affected by the fall in oil prices. Bond strategies have suffered as a result” observes Philippe Ferreira.
The year was more favourable for long/short shares, which gained on average 1.7% in 2014. “Some funds that neutralize market neutral risk were even more brilliant, with an average gain of 8% over the year,” notes Philippe Ferreira. This category of funds is now the one that seems to attract subscribers the most, “because it played its role as a shock absorber in the last quarter, he added.
But in the heteroclite universe of hedge funds, it is the CTAs (trend followers) who have created the surprise. After two lean years, they made their comeback in 2014, with an 18% gain. These multi-asset strategies (rates, equities, currencies, commodities) benefited in the last half of the year from the fall of the euro and the barrel. “Some of them even posted returns of more than 30%, such as the Epsilon fund,” notes Philippe Ferreira.