South Africa

Details

  • Industry: Financial Services, Investment Management
  • Type: Business and industry issue, Publication series
  • Date: 2012/05/07

The value of the hedge fund industry to investors 

Hedge funds, their role within financial markets and the returns they generate have been under considerable debate since the global financial crisis.

The Centre for Hedge Fund Research at Imperial College London has created a unique aggregate hedge fund and benchmark index database. The database represents a careful aggregation of all the current information from multiple leading sources about hedge fund performance globally. Survivorship bias is not a factor because both active and inactive funds are included.

 

Using HFR (Hedge Fund Research) hedge fund index data from 1994 to 2011, KPMG's performance analysis shows that hedge funds have significantly outperformed equities, bonds and commodities on a risk-adjusted basis.

 

The research found that hedge funds achieved an average return of 9.07 percent in the period 1994-2011 after fees, compared to 7.18 percent for stocks, 6.25 percent for bonds and 7.27 percent for commodities. Hedge funds achieved these returns with considerably lower volatility and Value-at-Risk (VaR) than stocks and commodities, close to bonds in both categories. The research also demonstrated that hedge funds were significant generators of "alpha", creating an average of 4.19 percent per year from 1994-2011.