Investors eager to make more hedge fund plays

Following are some of the report's key findings:

• 21 percent of investors said returns had exceeded their expectations, the highest level since Preqin started collecting the data in 2008;
• Top-quartile funds accumulated returns of nearly 30 percent;
• Asia/Pacific-focused funds gained 16.7 percent in 2013, followed by North American funds, up 16.6 percent, and European funds, up 13.6 percent;
• Relative value funds made gains of 7.1 percent in 2013, and had the lowest three-year volatility of any hedge fund strategy at 1.6 percent;
• Emerging market funds performed poorly — up 5.9 percent — compared with counterparts that targeted global and developed markets and in contrast to 2012, when they gained 12.6 percent;
• Macro strategies had the worst returns, adding just 2.4 percent in 2013. Commodity trading advisor funds were flat in 2013, taking three-year annualized returns to 0.9 percent;
• Funds of funds posted their highest net returns since 2009, up 7.7 percent in 2013. "In 2013, the Preqin Hedge Fund Index, a benchmark of average hedge fund returns, again lagged the S&P 500; however, despite this, investors are satisfied with the performance of hedge funds in 2013," Amy Bensted, Preqin's head of hedge fund products, said in a statement.

"Investors are now looking beyond absolute returns; they are also looking for funds to produce strong risk-adjusted returns with low volatility on a consistent basis," she added. "The performance of hedge funds over 2012 and 2013 has certainly delivered this."