Funds of hedge funds delivered all positive returns, according to Standard & Poor’s Fund Services’ latest update on the sector.
S&P’s says the most standout performances were those biased towards equity-related strategies. It cited special situations, merger arbitrage and long/short equity hedge as impressive classes, saying they benefited from buoyant merger and acquisition activity around the world.
Standard & Poor’s lead analyst Randal Goldsmith said although the M&A trend is not as fundamentally based as three years ago when it was backed by strong balance sheets and low valuations, it now has more momentum behind it.
Goldsmith says: “Equity and related strategies are being well rewarded although there is more risk of confidence suddenly disappearing. On the other hand, credit is tightly priced and exposed to the risks but does not share fully in the upside.”