GLOBAL - Hedge funds have posted their best year since 1999, but the average manager is still marginally short of recouping losses suffered during the credit crunch.
Funds made 20.04% in 2009, beating their similar returns of 2003 but not topping the 1999 returns of 31.3%.
In December, funds made 1.25% according to the pan-industry index published by data provider Hedge Fund Research (HFR).
This was better than the 0.55% December gain that preliminary indications from HFR suggested, and enough to eclipse the 19.3% the US$1.5 trillion industry made in 2003, the only year stopping 2009 from becoming the strongest in the decade. As early last Monday, there were concerns returns wouldn't beat those of 2003. (Global Pensions; January 11, 2009)
HFR analysis for Global Pensions shows funds are just 0.01% down on the investments they held in June 2007 - widely held as the eve of the credit crunch.
Typically managers can only charge investors including pensions a lucrative 20% performance fee after retracing all lost ground - which HFR suggests the average manager has not yet done.
Research by database BarclayHedge found 45% of hedge funds had still not recovered from damage done at the sharp end of the crunch, from June 2008, when hedge funds at Bear Stearns collapsed. The average shortfall among those who have still not made good since June 2008 is 17%.
Ken Kinsey-Quick, manager of Thames River Capital's Absolute Return fund of funds, said 2010 would test which managers possessed short selling skills, after many rode rebounding markets upwards last year.
"The beta play is coming to an end, now it will be about alpha, shorting markets or relative value plays."
Kinsey-Quick said TRC encouraged managers to run with rising markets when necessary, "but the key is having managers who are nimble with sub-$1bn funds, who can turn portfolios around when needed."
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.