‘Taking Stock’: Recent Developments in the Equity Hedge Fund Landscape (Barclays)

October 2014




  • Barclays


Equity Hedge Funds (HF) have traditionally accounted for a majority of the assets in the hedge fund industry. Many of the most storied names in the industry historically have been associated with Equity strategies. Over time, and more so in recent years, Equity strategies lost ground in terms of share of industry assets under management (AUM) to other HF strategies as investors cut their exposure to equities in the aftermath of the financial crisis – although that trend appears to be reversing itself.

Recent investor interest in Equity HFs is likely driven, at least in part, by strong performance of global equity markets, resulting in strong net new flows to Equity HFs. In this paper we take a close look at key industry developments pertaining to Equity HF strategies with an eye toward understanding the opportunities and challenges for Equity HF managers, as well as current investor sentiment toward these strategies.

The main areas we address in this piece are the following:

1. Equity HF developments and drivers

a. How has the Equity HF segment of the industry developed over time? What has been the evolution of AUM?

b. How have Equity HFs performed in various market environments?

c. Have Equity HFs delivered on their value proposition over time? What have been some challenges?

2. Analysis of Equity HF sub-strategies

a. How have various Equity HF sub-strategies performed recently?

b. How has the distribution of Equity HF AUM by sub-strategy changed over time?

c. How have investor flows been distributed across sub-strategies?

3. Equity HFs’ portfolio choices and their impact on performance

a. What are some of the strategic choices Equity HFs have made recently that have led to better performance?

b. How have certain portfolio management characteristics impacted returns?

4. Investor sentiment

a. Which Equity HF sub-strategies are investors currently allocated to?

b. How are allocations to these sub-strategies expected to change over the next 12 months?

c. What are some key investor preferences?