Despite public perception, hedge funds generate stronger returns
TORONTO, May 29, 2012 /CNW/ - Hedge funds significantly outperformed traditional asset classes such as equities, bonds and commodities over the last 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.
"Canada has historically had a strong but relatively small hedge fund industry compared to other global hedge fund markets such as the United States," said Peter Hayes, Partner, National Director - Alternative Investments, KPMG, in a presentation to attendees of the World Alternative Investment Summit of Canada in Calgary. "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 report, The Value of the Hedge Fund Industry to Investors, Markets and the Broader Economy found that:
- Per annum hedge funds returned 9.07 percent on average after fees between 1994 and 2011, compared to 7.18 percent for global stocks, 6.25 percent for global bonds and 7.27 percent 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 percent per year from 1994 to 2011
- Portfolios including hedge funds outperformed those comprising more conventional portfolios (60 percent stocks and 40 percent bonds)
"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," said Andrew Baker, AIMA's CEO.
The report is the first of a two-part series on the state of the global hedge fund industry and contains a literature review of current academic work on the industry. The report also highlights the positive contributions the hedge fund industry makes to the broader economy. Not only are hedge funds important liquidity providers in the markets they are active in, they also have a role to play in the efficient allocation of capital, portfolio diversification and financial stability.
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 145,000 professionals, in 152 countries.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.
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Senior Manager, Media Relations, KPMG in Canada