Hedge funds significantly outperformed traditional asset classes such as equities, bonds and commodities over the past 17 years, according to a study commissioned by KPMG and the Alternative Investment Management Association (AIMA).
The research, conducted by the Centre for Hedge Fund Research, is one of the most thorough of its kind to date.
Speaking at the World Alternative Investment Summit of Canada in Calgary, Peter Hayes, partner and national director of alternative investments at KPMG, said, “Canada has historically had a strong but relatively small hedge fund industry compared with other global hedge fund markets such as the U.S.
“We're now seeing accelerated growth in the Canadian hedge fund market, in part as a result of increased allocations from institutional investors to Canadian hedge fund managers, both locally and globally. This research disproves common public misconceptions that hedge funds are expensive and do not deliver.”
The Value of the Hedge Fund Industry to Investors, Markets and the Broader Economy found that:
- per annum hedge funds returned 9.07% on average after fees between 1994 and 2011, compared with 7.18% for global stocks, 6.25% for global bonds and 7.27% for global commodities;
- hedge funds achieved returns with considerably lower risk and volatility than stocks or commodities;
- hedge funds were significant generators of “alpha,” creating an average of 4.19% per year from 1994 to 2011; and
- portfolios including hedge funds outperformed those comprising more conventional portfolios (60% stocks and 40% bonds).
Andrew Baker, CEO of AIMA, said, “This research is powerful proof of hedge funds’ ability to generate stronger returns than equities, bonds and commodities and with lower volatility and risk than equities.”
