Multi-manager hedge funds hook investors with returns recovery

From Reuters - November 10, 2017

LONDON/NEW YORK (Reuters) - Multi-manager hedge funds, often star performers, have recovered from below-par returns in 2016, with investors adding $1.2 billion (908 million pounds) to them during the first three quarters of 2017.

Although traditionally they are meant to achieve some of the best returns by running different investment strategies and moving money between them based on their success, many investing approaches used by hedge funds actually lost money in 2016.

As a result, $1.8 billion flowed out of multi-manager funds last year, industry tracker Eurekahedge data shows.

The sector posted returns of 5.1 percent up to the end of September 2016, data from Preqin shows, while the S&P 500 index made gains of 8.6 percent over the same period.

Although these funds have generated returns of 8.14 percent on average so far to Sep. 30 this year, they have again lost out to the S&P 500 index, which was up 12.7 percent.

(Source: multi-strategy gains from Preqin, equities, macro and hedge fund gains from HFR)

Despite this, their improvement over last year is enabling some firms to return profits to investors.

Citadel, one of the largest team-based hedge funds with $28 billion in investment capital, is among the top performers this year, with gains of 11.43 percent in its flagship fund through October, a source close to the firm said.

It is now planning on returning all profits from 2017 to investors, a letter reviewed by Reuters shows.

Traditionally some funds want to keep funds under management below a certain level as it becomes harder to manage assets above that threshold.

A spokesman for Citadel, founded by Chicago billionaire Ken Griffin, said it routinely returns profits, though it did not in 2016 when it made 5 percent, a source close to the firm said.

We have routinely made profit distributions, in whole or in part, across a number of our funds over the past 20 years, Citadel spokesman Zia Ahmed said.



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