2014.06.0605:25:22UTC+00Activist route gaining traction for hedge funds

The start of 2014 has been largely disappointing for hedge funds around the world, creating gaps for new strategies to emerge with one becoming more viable than the rest: activist hedge funds.

The poor showing of the exclusive investment option was punctuated by its sorry results for the first quarter of the year. It was revealed that during that time, hedge funds gained a mere 1.2% while the Standard & Poor index jumped 1.8%,  their lowest in six years. The situation becomes even worse when a longer 12 month comparison is made to see how the 8.3% improvement of hedge funds pales to the index’ 19.32% gain.

Activist hedge funds, however, are bucking the trend of their peers by taking an unorthodox approach. Called as such because of the participants’ strategy to actively impact prices by agitating company situations such as through shuffling acquisitions and board members, these funds are enjoying much better returns.

Activist funds climbed an average of 11.8% in 2013 moving past the 7.9% of their peers and can boast of a generally superior performance over periods of two, three, and five years. As a result, the number of this type of hedge funds being established has more than doubled from 12 in 2012 to 28 in 2013.

With its rising popularity comes more risk, however, should a flood of participants lead to competition for opportunities.