While volatility and inflation remain heightened risks confronting financial markets, new industry data published this week points to a reinvigorated hedge fund sector set to see its coffers swelled this year by an investor base keen to put capital back to work amid the burgeoning economic recovery.

Barclays’ annual Global Hedge Fund Industry Outlook and Trends survey suggests investors could add some USD30 billion in new capital to hedge fund strategies this year as appetite for the sector rebounds thanks to a storming second half performance in 2020.

The study – which probed some 240 firms from across the allocator community – found that more than 40 per cent of investors are set to increase their exposure to hedge funds this year, driven by a desire for great portfolio diversification, risk mitigation and hedge funds’ potential to earn “equity-like returns with bond-like risk.”

Indeed, that influx of new money may already be under way. New eVestment data shows investors have added more than USD6 billion to hedge fund strategies over the past month.

Managers running macro and managed futures appear to be off to the strongest start, with many allocators said to be keen to build diversification plays in their portfolios due to underlying concerns over equity and credit markets.

At the same time, emerging markets-focused hedge fund strategies have seen assets surge to new highs over the past year amid vaccine optimism and hopes for economic reopening in 2021, Hedge Fund Research said this morning.  China-focused managers, always a keenly-watched constituency within the EM set, are said to be providing the foundation for continued positive momentum in the months ahead.

Equities risk, and the potential impact of inflation on markets following government spending rises during the Covid-19 pandemic, is explored in a recent in-depth commentary by Man GLG’s Pierre-Henri Flamand.

Flamand – the CIO emeritus and senior investment adviser at Man GLG – warned equity investors to position for looming inflation risks coming down the line, and tilt their portfolios toward certain market neutral strategies focused on European and Asian stocks to help curb excessive beta risk.

Hugh Leask
Editor, Hedgeweek




Copyright © 2023 All Rights Reserved