For hedge fund investors, last year was probably one best to forget as underlying risk assets did not perform well for a multitude of reasons, especially in the last quarter perhaps due to some monetary policy mishaps.

However, as Amy Bensted, head of hedge fund research at alternative asset info provider Preqin, observes, equities have rallied this year so what does this mean for hedge fund investors?

“As uncertainty rises on the one hand, on the other, valuations are strong in risk assets such as equities. So where to put capital: for protection or for growth? As we enter the last phase of the market cycle, investors may increasingly consider the active risk management that hedge funds can provide. Although hedge funds are not unaffected by downward market movements, it is their ability to mitigate losses and diversify risks that has produced attractive long-term Sharpe ratios. Now, perhaps, is the time for investors to look to hedge fund managers to help weather a future that looks increasingly stormy, and still access a healthy return,” Ms Bensted wrote in her latest blog.

While the fee issue that has engulfed the hedge fund world for some time appears to be cooling, apparently hardly any fund uses the once typical “2 and 20” anymore, the asset class and its various subdivisions have struggled to keep momentum for some time. Earlier this year, Fundeye reported that merger arbitrage strategies were doing well at the expense of CTA funds.

AS Ms Bensted observed: “The hedge fund sector represents a diverse array of products, instruments and regions; by employing multiple methodologies we can see significant performance changes between each and across quarters.

“As the market outlook grows increasingly divergent, building a portfolio that is diversified – strategically and geographically – may help investors to navigate all possible market directions. The trick will be finding the right managers from the 17,190+ funds currently open to investment.”

As is the trick with finding any actively managed product, it is down to finding “the right managers”. Fundeye often profiles funds to give readers insights into a manager’s strategy and style. Those wishing to achieve the most alpha may be wise to read these features as they appear.