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Jan 02, 2014

Hedge funds grew at fastest pace in five years in 2013

Asia funds outperformed while North Americans attracted most new investment

Hedge funds added $229 bn to their combined assets under management in 2013, the fastest growth since 2007, according to Eurekahedge.

Asset flows to hedge funds totaled $146 bn in 2013, more than in the previous three years combined, which totaled $110 bn, says the data firm. The Eurekahedge Hedge Fund Index increased 8 percent in 2013, further boosting total assets under management for the industry, which ended the year at $2 tn, an all-time high.

Hedge fund managers in North America led the world in terms of attracting new assets, with a net inflow of $73.6 bn in the year, followed by European managers, with net asset inflows of $62.4 bn, Eurekahedge says. Asia trailed with net inflows of $11 bn.

Asia, however, led the hedge fund industry in terms of performance, with gains of 15.3 percent. Funds focused specifically on Japan posted gains of 25.7 percent as the Japanese government launched its stimulus plan, driving stocks to record gains. Funds focused on Greater China, in the meantime, rose 19.3 percent.

Equities worldwide posted solid gains last year, boosting hedge funds, as central banks maintained loose monetary policy and investors became increasingly optimistic about the strength of the economic recovery, both globally and in the US, the world’s largest economy. The MSCI World Index gained 21.1 percent in the year, outperforming the Eurekahedge Hedge Fund Index.

Hedge funds with a strategy focused on investing distressed debt outperformed funds with any other strategy, posting gains of 16.8 percent. Long/short equities hedge funds rose an average of 14.3 percent, while event-driven investing strategies pushed funds up 11.3 percent.