After a year of scrambling to overcome high-water marks thrown up by 2008's broad portfolio losses, the hedge fund industry is approaching its October 2007 peak asset level. That bodes well for hiring, promotion and compensation prospects - especially for strategies such as relative-value trading that are leading the industry upswing.
Industry-wide assets under management have rebounded to roughly $1,67 trillion - just 2 percent below the previous record high, according to data from Chicago-based Hedge Fund Research (HFR). The Financial Times rerports:
Strong performance and the beginnings of investor inflows back into funds have seen the industry quickly bounce back from the lows hit in early 2009, when clients rushed to pull capital from hedge funds as part of a flight to more liquid investments.
Hedge fund returns averaged 24.55 percent last year and 2.56 percent so far this year, according to an index compiled by CFR. Last year's return was the highest in a decade.
The average relative-value fund has returned 3.58 percent in 2010. The strategy also outperformed in 2009 when it gained 25.8 percent. While that's close to the average for the broad index covering all fund strategies, the usual return expectation for relative value is less than half that because it entails less risk.
Career prospects within relative-value hedge funds gained along with investment prospects because many banks opted to shutter their proprietary trading operations.
This year's leading performers in the relative-value category include:
- Pimco's $2bn PARS IV fund (run by Bill Gross).
- Element Capital, run by Jeffrey Talpins, with $1.4 billion under management.
- Capula Global, whose $4 billion in assets makes it one of the group's largest.