APAC-focused hedge funds experienced the highest returns on a cumulative net return basis, at 6.47 per cent, in Q3 2024 when looking at Preqin data by geographical focus.

The Chinese government’s plans to stimulate the economy gave these funds a late boost in September, as equities rose. Charles McGrath, lead author of the report, notes this as a key driver of APAC-focused hedge funds seeing the highest returns, even as a selloff in tech stocks negatively impacted APAC-focused funds earlier in the quarter. North America-focused funds and Europe-focused funds returned 3.85 per cent and 2.49 per cent on a cumulative net basis, respectively, in Q3 2024.

Key report facts:

Overall hedge fund returns in 2024: Preqin’s All Hedge Funds Index was up 10.02 per cent in the first three quarters of 2024. However, this is below global equities at 19.1 per cent, but above global investment-grade debt at 3.6 per cent, over the same period.

Equity strategies follow equity markets’ rally: Equity strategies overall had a net return of 4.49 per cent in Q3 2024. Value-orientated and long-bias hedge funds had net returns of 5.58 per cent and 5.54 per cent, respectively, in Q3 2024 – the top performing sub strategies. Value-orientated funds saw returns increase as value equities rose ahead of growth equities, with the former being more sensitive to interest rate cuts.

Multi-strategy funds gain further interest: Multi-strategy hedge funds had a net return of 2.94 per cent in Q3 2024, lower than equity, event-driven and credit strategies. However, top-level strategy searches by hedge fund investors on Preqin Pro shows that multi-strategy funds are the most targeted strategy for the coming 12 months, with 57 per cent looking to allocate to these funds, up from 50 per cent in Q2 2024.

Charles McGrath, Associate Vice President, Research Insights at Preqin says: “Hedge funds rose with global markets in a positive, yet varied, third quarter. The long-anticipated cut by the US Federal Reserve in September capped an eventful period that included a small-cap equities rally, a brief yet jarring shock as funds rushed to exit the yen carry trade, and mixed economic data that simultaneously fuelled and exorcised the spectre of a US recession.”

The firm says that by accessing this innovative database, alternative fund managers, investors, and their legal advisors can expect to benefit from greater clarity when reviewing and benchmarking LPA terms. Ultimately, Term Intelligence makes it possible to see whether the terms are competitive within the market, and whether these terms, as well as the fees and expenses, are aligned with market standards to support LPA negotiations. 

Preqin writes that it introduced Term Intelligence to help mitigate the complications industry professionals face when drafting and negotiating LPA terms. Investment professionals on both sides of the table find the process of investing in a fund, including the legal due diligence and negotiations, to be complex and time-consuming.

“Prior to the release of Term Intelligence, the industry had limited data on LPA fees and terms and there was a lack of standardisation despite the provision of model form LPAs and guidance by the Institutional Limited Partners Association (ILPA) through the ILPA Principles 3.0. 

“Because of this, it has traditionally been difficult to know which LPA fees and terms meet market rate and by extension, how to distil the true cost implications across the fund’s life. While some large law firms already have an internal database of LPA terms that they have previously worked on, such databases may provide limited insight into market practices for LPA terms. This is because they only have access to their own firm’s past records – making it difficult to win clients in new areas or better serve existing clients in changing markets.

“Now with Term Intelligence, investors can conduct thorough pre-investment due diligence on fund terms, with the assurance that they have visibility over an objective baseline for what constitutes a market rate. Meanwhile, fund managers are able to compare LPA terms to a cross-section of funds, helping them draft competitive data-backed fund terms to secure needed capital for fundraising purposes. Finally, law firms can provide data-driven guidance to their investor or fund manager clients and expedite LPA negotiations. 

“As part of Term Intelligence’s data collection process, LPAs are provided by investor services offered by Colmore, a Preqin company. Information captured from LPAs is extracted, reviewed, anonymised, and aggregated by a specialized team of in-house attorneys, before being added to the Preqin Pro platform where clients can easily access it. This underlying dataset represents one of the largest databases of LPA terms globally, covering over 4000 LPAs to feed the growing terms benchmarks.”

Nicholas Donato, SVP, Head of Service Providers, at Preqin, says: “We are delighted to bring Term Intelligence to market to allow investment professionals, attorneys, and advisors to benchmark and compare economic and non-economic fund terms to a wide universe of LPAs, providing our clients with the clarity needed to negotiate with confidence.”

Heather Heys, VP, Head of Legal Insights, at Preqin, notes: “There remains real variation in the drafting in LPAs, for example, in how costs are allocated within the partnership. It is of key importance for investment professionals to understand what the market standard is for LPA fees and terms.”

More than two-fifths (41 per cent) of financial market participants in London, Stockholm, Geneva, Amsterdam, Frankfurt, Paris, and Milan, say processing new sustainability information is problematic.

This challenge is compounded by the fact that complying with ESG regulations was respondents’ biggest data challenge. More than a third (35 per cent) of firms reported that fulfilling regulatory requirements was the highest priority for accessing ESG data, followed by meeting climate risk and net zero objectives (18 per cent).

The problem stems, according to the research, from “coverage and quality issues with company-reported ESG data”, which was cited by 63 per cent of respondents as their biggest concern. 

One-quarter of firms surveyed say linking ESG data content to existing entity and instrument data is a problem along with meeting reporting requirements (18 per cent) and managing multiple ESG vendor feeds (16 per cent). 

Nadia Humphreys, Head of Sustainable Finance Data Solutions at Bloomberg, says that the EU’s Corporate Sustainability Reporting Directive (CSRD) in the EU, should “increase the quantity and quality of company-reported ESG data over the coming years”, but she notes that with this increased availability, “the need for seamless integration and management of this data will become more pressing, or risk slowing investment decisions”.

“While quality and comparability remain a global challenge, data management is coming into sharp focus for firms in Europe. If firms cannot organise their ESG data, they cannot effectively make decisions using that information,” Humphreys says.

The survey findings match similar concerns shown by European financial regulators in the past week.

Research from BaFin, the German financial watchdog, reveals that many asset management companies are “not satisfied with the ESG data and ESG ratings currently available on the market”.

Thorsten Pötzsch, BaFin’s Chief Executive Director for Securities Supervision and Asset Management, says: “The available ESG data and ratings still show substantial shortcomings. This is an area where I see greater transparency as crucial. The data and rating providers should more carefully explain how they draw up their assessments, which data sources they use and how they deal with gaps in their ESG data.”

Pötzsch says greater ESG data clarity and consistency is in the pipeline via the forthcoming European data portal ESAP, which requires companies to provide their sustainability data in a standardised format.

He adds: “In a draft regulation on ESG ratings, the European Commission addresses several other problems highlighted in our study. For example, it aims to improve the quality and integrity of ESG ratings, to increase transparency regarding the underlying methodology and to prevent conflicts of interest. I think these are good steps in the right direction.”

While they await such regulation, Pötzsch advises asset managers not to apply data or ratings without careful consideration.

“The companies need to understand what ESG data and ESG ratings represent and what they do not, since no market standard has been established yet.”

Bloomberg writes that GX pricing data further strengthens {BOIL<GO>} so that Bloomberg Terminal users can access a comprehensive view of spot oil and refined product price assessments that span from the spot market to OTC curves. 

“The refreshed and expanded dataset aggregates over 400 energy prices, including 160 new benchmarks provided by GX, so that customers can see a full view of market activity for key crudes and refined products across geographies. The benchmarks are calculated by GX using trade information from over 150 data providers and are externally audited to IOSCO standards. GX is also authorized by the UK’s FCA as a benchmark administrator.”

Emilie Gallagher, Global Head of Commodities, FX and Macroeconomics at Bloomberg, says: “In the current era of the macro investor, corporations and institutions will need access to global commodities market information and analytics to navigate economic uncertainty, upcoming geo-political events and an energy sector that’s in transition. Our strategic collaboration with General Index will provide Bloomberg Terminal customers with a transparent view of spot oil and refined product benchmarks and build on the foundational aspects of their investment strategy across critical asset classes.”

The GX-powered {BOIL<GO>} prices reflect both evolving trading patterns and well-established commodity pricing points that can be used in contracts and for trading. The 160 new benchmarks utilise market-relevant pricing and span key crudes in the Middle East, Europe and Canada, as well as other oil products in Europe, the Middle East and various Asian markets like Singapore, South Korea, and Japan.

Tickers align with specific regional market closures and follow a tech-based methodology backed by expert oversight. This offers market participants a transparent data solution for their commodities exposure. In addition to the price assessments on the Bloomberg Terminal, customers can access GX data for enterprise use via Bloomberg Data License and Bloomberg’s real-time market data feed, B-PIPE. 

Neil Bradford, Founder and CEO of General Index, says: “We are delighted to continue our strategic partnership with Bloomberg by bringing GX powered energy benchmarks to all Bloomberg Terminal customers through the refreshed and expanded BOIL function. The GX ethos is fair and affordable access to commodity price data, and having Bloomberg share in this vision further strengthens the market’s ability to better utilise the world’s resources.”

Event driven funds were the second highest performer during Q4 2023 (6.7 per cent) as well throughout 2023 (10.4 per cent). The strategy ticked up by catching a tailwind from M&A activity late in the year.

North America-focused hedge funds outperformed those focused on Europe and APAC, cumulatively returning 7.6 per cent in Q4 2023. Europe-focused hedge funds cumulatively returned 5.1 per cent in the fourth quarter, while APAC-focused hedge funds returned 2.5 per cent.

Multi-strategy and credit fund launches rose in the fourth quarter of 2023. The former made up 25 per cent of all fund launches in the quarter, up from 11 per cent in the third quarter of 2023. Credit-focused funds launches rose in proportion of all fund-starts (18 per cent) in the fourth quarter compared to Q3 (11 per cent) as central banks indicated that the end of the rate-hiking cycle could be approaching.

Charles McGrath, AVP, Research Insights at Preqin says: “Hedge funds investors have reason to be optimistic about 2024 if rate cuts do materialise, but with some caution. Increases in both risk and correlation to public markets, particularly among equity strategies, is something to consider. This level of risk is concerning in that it has risen disproportionately to returns, impacting risk-adjusted returns, a key pillar of hedge funds’ place in the larger portfolio.”

The firm writes that there are 3,421 private capital first-time funds in the market globally as of the end of Q3 2023, representing almost a quarter (24 per cent) of the total 14,461 funds. However, the lower average target size of first-time managers means the USD450 billion they are seeking to raise makes up only 13 per cent of the USD3.36 trillion total according to Preqin data. 

By the end of Q3 2023, 269 first-time funds closed, or 17 per cent of the overall total of closed funds. But the USD38.8 billion raised by these first-time funds was only 5 per cent of the total capital raised during the same period. 

This supports a trend in recent years in which first-time managers take a lower share of the total capital being raised, as a tough fundraising environment means fewer investment professionals are currently willing to spin out from existing teams to launch their own firms.  

Key report facts:

Region: North America experienced a strong growth rate in the number of first-time funds closed and is the largest source of first-time managers, with 139 funds closed as of Q3 2023, compared with 44 in Europe and 41 in Asia.

Performance: Preqin’s performance data suggests that first-time funds do outperform. Preqin data showing the median net internal rate of return (IRR) of first-time managers for the 2020 vintage was 16.5 per cent for private equity while 21.0 per cent for private equity first-time managers, then 20.9 per cent for venture capital while 36.5 per cent for venture capital first-time managers. For those that do outperform, part of this may stem from the lower average fund sizes of first-time funds. This allows firms to deploy smaller amounts of capital into smaller capitalisation companies that are more likely to be overlooked by larger fund managers. 

Preferential terms: Investors have a strong incentive to develop early relationships with emerging managers. For instance, early investors are in a prime position to negotiate favourable fund terms in return for early backing. Furthermore, allocating to first-time managers offers an advantage of improving the pipeline of potential deal flows available to LPs. Among the investors tracked by Preqin, there are 368 family offices open to investing in first-time managers, 279 for public pension funds, and 216 endowment funds, as of June 2023. Among Fund of Funds (FoFs) managers tracked by Preqin, 81 per cent are open to investing in a first-time private equity or VC fund, while 80 per cent of fund of hedge funds managers would be open to investing in emerging managers.

Cameron Joyce, SVP, Head of Private Equity, Research Insights at Preqin, says: “Raising capital in the current market landscape presents formidable challenges. These conditions disproportionately impact aspiring fund managers who are looking to launch their first funds. As private market investment programs mature and relationships with established fund managers settle, there can be a tendency to stick with the status quo meaning that differentiation is key in a market where it can be difficult to stand out.”

Accessed via BBH’s Infuse client portal, InfuseDX builds upon BBH’s continued investment in technology to support its core services and enhance its data solutions. The new user experience provides clients with on-demand transparency into BBH’s data reporting, allowing clients to customise and package their data as needed.

“Data efficiency is the highest priority for many of our clients. InfuseDX was purpose-built to deliver this efficiency – providing streamlined access to data in real-time to match the pace of decision making, and the ability to customise that data to meet unique requirements.” says Joshua Fine, Principal, Data Solutions at BBH. “InfuseDX is an important milestone in BBH’s overall investment in data solutions, which will continue to evolve as we expand our capabilities.”

Tim Bosco, Managing Director, Data Solutions at BBH says: “When building InfuseDX, our goal was to ensure, first and foremost, that the data was robust and comprehensive. But it was equally important to ensure that the data was organised and curated in a way that was intuitive for users, and easy to customize. We wanted to make sure that clients could access their data in the way that was most compatible with their consumption needs.”

Key features of InfuseDX include:

Real-time: 24-7 access to the most up-to-date information available about operational workflows to enable more informed and timely decision-making.

Customisable: Options to rename, reorder, filter, or hide data reporting elements for personalised views of data that is most important.

Accessible: Features to efficiently save, share, schedule, automate, or export data sets, reducing time and effort required to access critical information.

Pre-configured: Wide range of pre-defined and editable data domains curated by BBH’s asset servicing subject matter experts.

Easy-to-Use: Highly intuitive user experience and design for more efficient onboarding and training.

InfuseDX has been rolled out to BBH’s clients over the course of 2023 and will be continuously enhanced with additional data sets throughout 2024.

In this proof-of-concept phase, Atlas is focusing on improving data collection methodology and platform development, the team writes.

“While plenty of data on the industry are currently available, the data are spread over many protocols, market actors and jurisdictions, and reporting is often not regulated or standardised.

“The project report details how the proof of concept uses transactions between crypto exchanges in the Bitcoin network, along with the location of those exchanges, as a proxy for cross-border capital flows. Attribution data links on-chain transactions to crypto exchanges, which are then mapped to their geographical location (where possible).

“The derived bilateral flows between countries are visualised on a globe that presents the data in a user-friendly and easily accessible manner. An initial analysis of preliminary data collected by the platform shows that cross-border flows are substantial economically and unevenly distributed across geographical regions.”

“Project Atlas is a great example of what the BIS Innovation Hub can achieve. Working in the intersection of economics, finance and computer engineering, we are developing a new and important public good for central banks globally,” says Cecilia Skingsley, Head of the BIS Innovation Hub. “The data on cross-border flows are relevant for areas like payments and macroeconomic analysis,” she adds.

Burkhard Balz, Member of the Executive Board of the Deutsche Bundesbank, says: “Atlas enables a variety of use cases. Researchers can structurally analyse the micro data while policymakers can access tailored dashboards for insights at a glance. I am excited about the potential and future developments of this project.”

The BIS Innovation Hub develops solutions that take the form of proofs of concepts, prototypes or minimum viable products. The first proof of concept of Atlas successfully showcases how to collect, clean and analyse data relevant to central banks’ mandates. Project Atlas hence provides a starting point for holistic analysis of existing data. For example, it can help identify inconsistencies across data sources, and provides data which can be used to analyse the macroeconomic relevance of crypto markets and potential financial stability implications.

 Olaf Sleijpen, Executive Board Member at De Nederlandsche Bank, adds: “Atlas leverages the diverse skills of an inter-disciplinary team including developers and economists. It is great to see what the team has accomplished. Project Atlas could be a valuable tool for the central banking community for years to come.”

The firm writes that, developed in collaboration with one of the world’s largest asset managers, and leveraging big xyt’s proprietary European tape, this turnkey solution captures billions of messages daily, and processes data in less than one second (with 500 intra-day data quality checks each day).  The solution delivers a variety of off-the-shelf use cases for the trading and investment industry, including tracking accurate and reliable market share and volume calculations intra-day.    

big xyt writes that using this service, trading firms, exchanges, dealing desks and issuers can effectively monitor consolidated liquidity, including unexpected off-book trading activity, trades of unusually large size, pending trades and sudden increases in OTC volumes. Investors can access and analyse consistent and reliable pre-trade and post-trade information to better understand liquidity and trading conditions at the time it occurs and to support trading decisions. Users can access same-day, consolidated reports on market fragmentation to understand the liquidity of a given stock or ETP.

Robin Mess, CEO and Co-founder at big xyt, says: “We have established a strong reputation with leading buy-side firms as the ‘Golden Source’ for European securities data.  We are delighted to be able to take our proven expertise to the next level to meet growing industry demand for consolidated, normalised and real-time data analytics on European markets liquidity, particularly with respect to off-book volumes. 

“Moving from overnight to real-time data processing reduces the complexity of market fragmentation in a cost-effective way, and will enhance the attractiveness of European markets to issuers and investors alike.”

The firm writes that cost and technical challenges have historically been impediments to streaming analytics (real-time and delayed), especially for off-book volumes, due to a lack of tape and reliable normalised data on European markets, as well as maintaining analytics on multiple streams of raw source data, in particular pre-trade metrics.

big xyt’s solution is delivered As-a-Service and is accessible via web-based front-ends and APIs, minimising the burden of resources, time and costs of implementation. big xyt is co-located in major data centres to capture tick data reliably and consistently from multiple real-time feeds, and its proprietary technology stack is designed to accommodate volume surges with the highest standards of data quality, monitoring and system resilience.

Real-time analytics are available now across big xyt’s full product range, including the Liquidity Cockpit for Equities, the Liquidity Cockpit for ETFs, and the Open TCA solution for execution analytics.

The firm writes that for the first time, customers can get an early read on company performance, side-by-side with the traditional fundamental data for which Bloomberg has long been known. ALTD <GO> supports equity analysts and portfolio managers with intra-quarter insights and can be easily incorporated into research workflows – alongside consensus estimates, company news, research and guidance – well ahead of earnings announcements.

Bloomberg writes that, currently, alternative data adoption by investors is limited by the high cost of quality datasets and the requirement of building dedicated teams of data scientists in order to utilise data effectively in research workflows. Through the Bloomberg Second Measure acquisition completed in 2020, Bloomberg began offering the highly sought-after consumer transaction data feed and analytics products. Now, through ALTD <GO>, all Bloomberg Terminal users can easily incorporate consumer transaction data analytics, location analytics from launch partner Placer.ai, and other types of alternative data into their research workflows to better inform their investment strategies.

“With ALTD <GO>, we are democratizing access to alternative data by seamlessly integrating it into the Bloomberg Terminal alongside traditional market data, broker research, estimates and news,” says Shawn Edwards, Bloomberg’s Chief Technology Officer. “By launching this product, we are empowering our clients with the ability to gain faster and deeper insights into the performance of companies and economies. The future of investment research will be driven by data, and Bloomberg will continue to invest in innovative products and technologies that enable our clients to make better data-driven investment decisions.”

Bloomberg writes that its Bloomberg Second Measure serves as the flagship data analytics source for ALTD <GO>. Within the function, it uses aggregated analytics from billions of credit card and debit card purchases to provide near real-time consumer transaction insights on over 300 public tickers, with this list expected to grow rapidly in the coming months. ALTD <GO> also includes data from location analytics leader, Placer.ai, which analyses foot traffic data. Placer.ai utilises a privacy by design approach to incorporate data from a panel of 10s of millions of mobile devices, applying machine learning and AI algorithms to make estimations on visits to retail locations across the US.  Bloomberg plans to strategically add additional alternative data sources based on customer demand. 

“Bloomberg is breaking down a critical barrier to enable wider utilisation of alternative data, and we are thrilled to be the launch partner for this vision. Location analytics presents a critical lens to viewing true company performance, and bringing this perspective into a unified view is a leap forward in empowering investors to deepen their understanding of market opportunities,” says Koby Ben-Zvi, President of, Placer.ai. “Through ALTD <GO>, Bloomberg Terminal users can deploy our foot traffic analytics to generate insights into venues and consumer trends and optimise decision-making.”

Richard Lai, Global Head of Alternative Data in Bloomberg’s Office of the CTO says: “Alternative data enables customers to gain faster, deeper insights into company performance. The launch of ALTD <GO> is just the beginning. We will continue expanding the universe of high quality alternative datasets available via Bloomberg’s products, and enhancing the unified data model that ties these datasets together. This will enable us to create more powerful analytics to support our customers in finding differentiated investment opportunities through deeper levels of research than previously possible. As always, we will work closely with our customers to understand and address their data needs.”