• Q309 results confirm the hedge fund industry in general is en route to its best performance since 1999. Major trends that benefit hedge funds and funds of hedge funds (FoHFs), include rising equities, lower credit spreads, and improved liquidity.
• Total hedge fund assets bottomed out globally in Q109, but Q209 and Q309 witnessed net positive client subscriptions. The situation is less favourable for FoHFs, which continue to suffer from net redemptions.
• Top-down macro positioning has been a dominant factor in terms of performance generation. Pure market-neutral strategies are less convincing. Convertible bond arbitrage and emerging markets strategies are clear winners in the alternative investments universe to date and market exposure is key.
• Hedge funds are progressing back towards directional trading; however, the risk remains that macroeconomic concerns thwart this impulse.
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