Hedge fund marketing will get more traction this year as fund managers turn to complex hedge fund strategies to make profit despite surges in the market’s volatility.
The past year has not been stellar for hedge funds. October 2014 saw a lot of hedge fund managers losing their entire year’s gains. Despite this, recent surveys reveal that hedge fund strategies have been attracting investors who seek riskier approaches that are advantageous during periods of high market volatility, as is predicted for 2015.
In particular, some hedge funds benefited from their strategies when prices fell down. Those who scored high at the end of last year gained their returns by benefiting from falling shares. This hedge fund characteristic of being able to make returns whether prices are going up or down is the major attraction for investors.
The growing interest in risk-managing hedge fund strategies looks like it is more than a passing trend. The market volatility is a product of the end of the U.S. Federal Reserve's post-crisis asset purchase program and its effects will be felt for a while, as already demonstrated by the fall of a lot of oil assets.
According to one manager with more than $100 billion in assets under management, a lot of investors who previously had had no investment in hedge funds are now showing interest. They know very well that these strategies have been demonstrated to perform well when there is increase in volatility and there is more stock dispersion.
For example, the first half of 2014 showed that betting on both price gains and falls, also know as the "long-short" hedge fund strategy, resulted to about 10% returns. This, together with the strategy of betting on mergers and acquisitions, yielded returns bigger than the industry has seen in any full year since the 2008 financial crisis.
The Short of It
It is the job of fund managers to insulate portfolios from big economic downturns, but some criticize them for their high fees. Their management charges and commission can only be justified when they consistently show their ability to pull in returns and protect the portfolio.
Some investors are being cautious when choosing which hedge fund strategies to employ. It seems that the ability to bet on price falls are winning the most more followers in times when gains are more elusive because of a highly volatile market.
According to one global hedge fund manager, the long-short strategy has been a great way to hedge against the market correction and it will contribute to hedge fund services’ growing popularity this year. Hedge fund marketing can take advantage of this opportunity by pitching this strength to investors who fear the market’s volatility and seek insulation from it.
