Event-driven hedge funds' skills stand out in H1 - BlackRock


(Reuters) - Hedge fund managers looking to profit from corporate events such as mergers and acquisitions proved to be the most skilful in the first half of the year, a study on Thursday by top global money manager BlackRock showed.

The group earned more than half of their investment returns through their own skill, known in the industry as 'alpha', as opposed to a return available just by tracking the underlying market.

The study looked at 1,549 funds and found such "event driven" funds gained 4.3 percent during the period with an average 2.5 percent coming from their managers' trading skills, as they exploited an increase in deal making activity.

The hunt for alpha, or excess return over market gains, is a key driver of investor interest in hedge funds and the reason for a typical 2 percent management and 20 percent management fee charged by them. That fee is, however, under intense scrutiny as a large number of funds fail to generate alpha consistently.

"The M&A environment has proven to be fertile hunting ground for event-driven hedge funds, and many managers have delivered on their alpha promise," said David Barenborg, head of hedge fund manager research at BlackRock Alternative Advisors.

By contrasts, hedge funds looking to profit from rising and falling share prices, known as long/short equity strategies, failed to generate any excess return, the study found.

Overall, the study found that top performing hedge funds as a group made less money in the first half of the year than a year before period, while the worst of them cut their average losses during the period as the gap between the best and the worst performing hedge funds moderated in the first half.