If you had the money and the risk appetite, but didn’t invest in Indian hedge funds this year, you have missed out. India-focused hedge funds delivered a 23.7 per cent return in the first seven months of this year. This was largely made possible by a broad-based rally in Indian stocks that lifted the Sensex 22 per cent during the period. The returns decimated the 3.2 per cent rise in the MSCI World Index in January-July 2014.

Strategic focus

Consequently, Indian hedge funds with a long-short equity strategy should have been the top choice for hedge fund investors during the period, with a spectacular 31.5 per cent return, according to Eurekahedge, an independent financial data and research company focused on alternative investments. Multi-strategy funds also did well, but lagged the equity market with just 21 per cent returns to show at the end of July. Fixed income funds were a poor avenue to invest in, with returns of just 10.6 per cent.

The global hedge fund industry, as a whole, also lagged Indian hedge funds, with average returns of 2.8 per cent. Asia-focused funds too could not keep pace with Indian hedge funds, even as they outshone their global peers.

Global gains

While Asia ex-Japan funds delivered an average return of 3.7 per cent, Greater China funds underperformed with gains of just 2.6 per cent. Outperformers in 2013, Japan-focused hedge funds could only muster 0.9 per cent. And hedge funds targeting Australia and New Zealand only managed 7.7 per cent returns.

Meanwhile, North American hedge funds gained 3.7 per cent in the seven-month period and European funds 1 per cent. Hedge funds targeted at emerging markets saw a 4.1 per cent rise, while Latin American funds climbed 3.5 per cent. But funds targeted at Eastern Europe and Russia fell by 6.5 per cent amid geopolitical tensions in the region.