Following the hurdles generated throughout 2020 by the Covid-19 pandemic and its repercussions, the capital raising environment for hedge funds over the course of 2021 has been generally positive. Experts at eVestment detail the outcome of 2021. “If forced to make an educated guess, it would seem net flow in 2021 will end up reversing the theme of net outflows the industry has felt over the prior three years.” The data provider adds that there are factors that appear to be positively influencing some segments, but which could hurt others.
By Angele Paris – Following the hurdles generated throughout 2020 by the Covid-19 pandemic and its repercussions, the capital raising environment for hedge funds over the course of 2021 has been generally positive. Experts at eVestment detail the outcome of 2021. “If forced to make an educated guess, it would seem net flow in 2021 will end up reversing the theme of net outflows the industry has felt over the prior three years.” The data provider adds that there are factors that appear to be positively influencing some segments, but which could hurt others.
Investing in alternatives
Equitas CEO and Founder, David Thomas notes how alternatives are becoming a more widely-accepted and widely-used asset class, led by university endowments and family offices.
A report by consultancy, McKinsey points out how persistent client demand for alternative asset classes has led to the creation of new types of alternatives as the industry looks to meet client needs, in particular the notable hunger for yield in the current low-interest-rate environment.
The report, entitled ‘Crossing the horizon: North American asset management in the 2020s’, details: “This demand has led to a significant broadening of the alternatives universe in three respects: first, the emergence of “core” versions of existing alternative asset classes – notably private equity and real estate – that target the white space prevailing lower in the risk-return spectrum; second, the rise of yield-oriented alternative asset classes – principally private credit and real assets – as functional substitutes for fixed income in the portfolio; and, third, the rise of new strategies (often tagged “opportunistic”) that seek out new sources of alpha beyond the boundaries of traditional asset classes and industry sectors.”
Hedge funds
Although the hedge fund industry has had a good run in 2021, the trials and tribulations caused by 2020 should not be underestimated. Jerry Wang, CEO of Haitou Global and Managing Partner of Haitou Global Credit Fund, winner of Best Emerging Manager Fund – Credit Hedge, outlines the lessons learnt over the course of the pandemic. “We learned to stick to our guns. Keep faith in your strategy, team and partners during the darkest hours. Once riding off market volatility, you’ll be back on track. We learned to be sceptical. We used our own judgement, absorbing pandemic information from all sources. We responded early to the pandemic – better to be overreacting than sorry.”
ESG and sustainable investing
Another area of focus which has come to the fore in the past year is sustainability, as investor appetite for sustainable-conscious investments continues to rise, and a number of large alternatives firms launch sizable funds in that space.
“Given the trillions of dollars required to fund the brown-to-green transformation of economies, and the critical role of the asset management industry as an intermediary between sources and uses of capital, sustainability could well be one of the most important sources of new opportunity for asset managers over the next decade,” the McKinsey report concludes.
Scott Kerson, Head of Systematic Strategies, Gresham Investment Management, winner of Best CTA Hedge Fund award, feels that ESG and governance issues will create more pressures to do things differently. “The transition to more efficient, less carbon-intensive economies, is going to have all sorts of implications for asset flows and asset allocation, as well as for the way we produce and consume things. And that will continue to create both opportunities and threats to anybody in the space,” he comments.
