Hedge Funds What Happened & What What ss Next? Ee Fai Kam Head of Asian Data, Preqin Alternative Investments Summit India 2017
Big Picture Resilience + Expect the unexpected
About Preqin Private Equity & Venture Capital Hedge Funds Real Estate Infrastructure Private Debt Natural Resources Data available via online databases, publications and research reports Clients include over 44,000 industry professionals from 16,000 firms London San Francisco New York Singapore Hong Kong Manila Multi award winning service
Use of Alternative e Assets Hedge funds important in institutional portfolios
Hedge Funds: What Happened ed in 2016? Brexit: Improving sentiments July Nov % of managers seeing negative impact 34% 21% % of investors expecting to invest less in UK 31% 21% % of investors expecting to invest more in UK 7% 13%
Hedge Funds: What Happened ed in 2016? More assets, more funds and more investors Coins $3.216tn $101.6bn Hedge fund industry AUM has increased by $19bn since December 2015 to $3.216tn as of November 2016. Investors withdrew an aggregate net $101.6bn from hedge funds in 2016. People 5,100+ More than 5,100 institutional investors allocate to hedge funds. +49 funds 1,030 hedge funds launched in 2016; in contrast, 981 funds closed.
2016
Performance Review e on Hedge Funds Two thirds of investors believe hedge fund performance did not meet expectations over the course of 2016 Prop portion of Resp pondents 100% 90% 80% 70% 60% 50% 40% 30% 10% 0% 21% 63% 16% 8% 9% 57% 58% 35% 33% 3% 31% 66% 2013 2014 2015 2016 Exceeded Expectations Met Expectations Fallen Short of Expectations
Hedge Fund Performance Review by Strategy Emerging market strategies were rated highly by investors 100% Propo ortion of Resp ondents 90% 80% 70% 60% 50% 40% 30% 10% 25% 75% 31% 69% 40% 40% 60% 60% 50% 53% 58% 58% 60% 50% 47% 43% 42% 40% 71% 73% 29% 27% Fallen Short of Expectations Met Expectations 0%
Hedge Fund Net Returns by Strategy Event Driven strategies was the top performing strategy in 2016. Q1 2016 Q2 2016 Q3 2016 Q4 2016 Cumulative 2016 Macro Strategies Event Driven Strategies Equity Strategies Event Driven Strategies Event Driven Strategies 1.49% 3.97% 5.05% 4.02% 12.44% Credit Strategies Credit Strategies Event Driven Strategies Credit Strategies Credit Strategies 0. 2.34% 4.58% 2.18% 8.49% Multi Strategy Macro Strategies Credit Strategies Relative Value Strategies Macro Strategies 0. 2.21% 3.49% 1.96% 7.09% Relative Value Strategies Equity Strategies Multi Strategy Multi Strategy Multi Strategy 0.43% 2.08% 3.15% 1.78% 7.03% Event Driven Strategies Multi Strategy Relative Value Strategies Macro Strategies Equity Strategies 0.50% 2.03% 2.12% 1.44% 6.64% Equity Strategies Relative Value Strategies Macro Strategies Equity Strategies Relative Value Strategies 1.82% 1.10% 1.68% 1.29% 4.74%
Fund Launches and dcosues Closures in 2016 Fund closures outpaced launches in multi strategy, credit strategies and CTA sectors.
Investor Plans for Hedge Funds in 2017 More investors plan to reduce their exposure to hedge funds (38%) 100% Respondents Proportion of 90% 80% 70% 60% 50% 40% 30% 10% 0% 29% 26% 25% 35% 38% 33% 32% 43% 44% 51% 47% 58% 54% 53% 60% 38% 32% 16% 10% 9% 8% Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Increase Allocation Maintain Allocation Decrease Allocation
Investor Plans for Hedge Funds in 2017 than plan to increase their allocations ()...The second time Preqin has noted this Respondents Proportion of 100% 90% 80% 70% 60% 50% 40% 30% 10% 0% 29% 51% 35% 38% 54% 53% 10% 9% 33% 32% 47% 60% 8% 26% 25% 58% 16% 44% 32% 43% 38% Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Increase Allocation Maintain Allocation Decrease Allocation
Investor Plans for Hedge Funds in 2017, by Strategy Relative Value Strategies 26% 69% 6% Macro Strategies 25% 55% Event Driven Strategies 24% 61% 15% Equity Strategies 24% 56% 19% Credit Strategies 15% 74% 12% Managed Futures/CTA 13% 61% 26% Fund of Hedge Funds 13% 58% 29% Multi Strategy 7% 81% 12% Emerging Markets 7% 73% Activist 80% 0% 10% 30% 40% 50% 60% 70% 80% 90% 100% Proportion of Respondents Increase Exposure Maintain Exposure Decrease Exposure
Key Issues Facing the Hedge Fund Industry Today Performance, fees and perception of the industry by the public were rated as the leading issues facing the industry by investors Performance Fees Perception of Industry by Public Volatility/Uncertainty in Global Markets Regulation Governance Transparency Portfolio Management Notable Investors Exiting the Asset Class 10% 19% 18% 18% 29% 42% 49% 64% 73% 0% 10% 30% 40% 50% 60% 70% 80% Proportion of Respondents
Key Issues Facing the Hedge Fund Industry Today Fund managers agree 80% 70% 73% 64% Propo ortion of Resp pondents 60% 50% 40% 30% 10% 38% 29% 25% 16% 12% 0% Performance Investor Demand for More Favourable Fees Market Volatility Transparency around Risk and Performance Competition in Fundraising Investor Appetite for Alternative Investment Funds Liquidity at Fund Level Regulatory Scrutiny of Alternative Funds Investor Scrutiny of Alternative Funds
Fund Manager Outlook on Performance by Strategyt Credit strategies are predicted to perform the worst in 2017; equity strategies are expected to perform the best in 2017. 2016 Performance Rank Top-Level Strategy 2017 Performance Rank Prediction 1 Event Driven Strategies 3 2 Credit Strategies 7 3 Macro Strategies 2 4 Multi-Strategy 4 5 Equity Strategies 1 6 Relative Value Strategies 6 7 Managed Futures/CTAs 5
Fund Manager Plans for New Hedge Fund Launches 37% of respondents are planning to launch a new fund in 2017 14% 11% 26% of which 66% are planning to launch in Q1 2017 5% 7% and 28% reported that it would be a new strategy for their firm 26% Equity Strategies Event Driven Strategies Relative Value Strategies Multi Strategy 11% Macro Strategies Credit Strategies Managed Futures/CTAs
Data Sources Free reports available from /research Preqin s online services: /services