Therefore, for they did move back into overall positive alpha; by individual manager, the alpha was quite diverse. Many managers struggled because a relative value approach based on GARP principles was not rewarded.

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Managers were rewarded for picking long term leaders in their industry almost irrespective of valuation, especially in the consumer staples area. This differentiated performance as some managers had this thesis while others tried to short it with little success. Some of the other key sectors for identifying winners were in Internet and technology. Macau gaming offered some of the more volatile investing opportunities.

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Only towards the end of the year did we see a reversal of the winners into cheap cyclical stocks. Most managers failed to fully exploit the high dividend trade which was a core strategy for many retail investors. This can be seen in the heavy outperformance of the REIT markets over the broad equity market.

They tended to get dismissed by the more fundamental investors on a weak long term growth criteria. Resource stocks were probably a net detractor of value. Many failed to fully appreciate the vulnerability of these stocks to the combination of a China slowdown and tight credit markets, especially stocks that had yet to reach production.

Japan proved a good source of shorts, especially in the consumer electronic sectors. However, it did become dangerously consensus driven and reversed heavily late in the year. This did come back very strongly in December. However, we recognise that most of the managers are fairly tactical and market neutral. In aggregate, the neutral managers were fairly flat for the year.

In fact they have been fairly flat for two years after being some of the better performing long short managers over the global financial crisis. Historically, these managers had produced very consistent alpha with minimal beta.

Many made a lot in the first two months only to lose it all again and recover only towards the end of the year. Again alpha was not high. What we observed was that global and Pan Asian managers more remote from Japan actually did better trading it on both the long and short side. They seem to have more objectivity on the macro issues.

Purely Japan-focused managers seem to have become overly tactical and short term. Even as the equity market panicked at various points in the year, there was not the same degree of contagion into credit markets.

The liquid credit managers tending to stay cautious most of the year, yet they made reasonable returns on relatively hedged portfolios. Quite a bit of alpha has been derived from credit specific events and good primary deal flows. The less liquid credit managers focused more on distressed and direct lending.

FX hedge fund average annual ROI: 50%. Classic car average annual ROI: 50%!

Opportunities have been abundant in the tight credit environment. The nature of the strategy means reported returns appear steady unless there is a specific credit event. Asia enjoys a healthy spread between the perceived risk or access to capital and the real underlying business risk. One style focusses more on local currency and rates with a strong relative value bias. This has been a very steady returning strategy for a number of years on very low correlations to the asset markets. The other style is more directional and produced highly variable results.

The equity markets were challenging most of the year. For most Asian currencies the scale of appreciation versus the relatively volatile macro environment made gains difficult. Most looked at the commodities and commodity currencies as the best way to play the China slow down. Most played it through the currency or equity markets. This is mainly due to two factors, the first being the tendency to be more heavily hedged than the other strategies and in hindsight most would acknowledge that they were probably over hedged.

The second factor is that multi strategy funds tend to be fairly correlated with capital market deal flow. In the Chinese IPO window remained largely shut and the number of secondary blocks was modest.

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Multi-strategy funds also tend to be active in convertible bonds and equity events. The relatively cheapness of legacy convertible bond portfolios has generated reasonable returns. However, modest issuance has limited the degree the strategy can be scaled up. In forex, they can use the same as individuals and will vary their leverage based on expected market duration. If they are looking for short term trades then If they are position trading then much, much less. A financial adviser or investment firm? A hedge fund? Remember, the fundamental purpose of a hedge fund is to profit when equities markets are down.

This past year the equities markets were up so hedge funds would naturally struggle a bit more. The OP quoted an industry average of 1. The average return to investors was a bit anemic and these same investors will, no doubt, start looking for new hedge funds to make them money since they do not fully understand what they are there for to begin with! Pension funds almost always invest in hedge funds to some degree - please Google that or research it otherwise.

Average hedge fund annual return = % - Trading Discussion - Forex Trading Forum

As an investor, when you invest in a hedge fund you provide them with your desired risk appetite and they invest it accordingly. Whether or not you believe that is up to you. Once again, Google or research it. If you can honestly prove to me that a hedge fund investing in currencies can use the same leverage as an individual, then I am utterly stunned. Who is the counterparty to that?? A pension fund exists for employee retirement, usually with an investment horizon over of 20 to 30 years. They invest primarily in annuities, bonds and equities and are usually managed by pension fund management firms or divisions of companies such as Charles Schwab or T.

Rowe Price. They have have no need for short term, high risk vehicles such as those provided by hedge funds except to limit some downward market exposure. Current U. Private sector pensions are not much more. Most hedge funds are not very large some are, of course. An individual can choose a hedge fund based on risk appetite but cannot dictate what kind of risk exposure the fund will or will not expose the individual to.

Hedge funds do not segregate their investors based on the individual risk appetites of its investors.

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That is an investment firm — at least in the U. Yes it is definitely possible. You can look at it one of two ways thats risky! If the broker offers it fine! After all, thats what ECN brokers are for plus they offer high leverage. But another question I wanted to ask, is there a difference between a hedge fund or a forex fund?

What about a hedge fund that specializes specifically in trading forex? It should be an individual right to start a company trading forex exclusively and offering returns for clients, especially if my system proves its stability, and as long as my client agrees to their return I should be allowed to keep exceeding profits. They are not doing anything.

This is what im still trying to understand. Yes, you can start a hedge fund.

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Just form an LLC with a cool sounding name, open a bank account and a trading account. You are all set. You are now, offfically, a fund manager. Louis, Illinois and you can really impress the women. Your fund can have its primary or exclusive focus be stocks, forex, venture capitalism or trading comic books.

You can lay out whatever fees you wish, after all, it is YOUR fund. Hedge funds are not some super-duper, must be worshipped sacred entities. They are a dime a dozen. Most quickly fail and go under. Some excel and become legitimate billion dollar entities but these are quite rare.

And guess what?