The dramatic GameStop/Reddit short squeeze that dealt sharp losses to several hedge funds earlier this year sparked a degree of epicaricacy towards this business from outsiders – but new industry data shows investors continue to keep the faith heading into the second half of what has been another eventful year for the alternative asset management sector.
Research published this week by eVestment indicates that both strong investment performance and growing capital allocations are driving global hedge fund assets to new highs, with the industry poised to comfortably outperform last year’s near-12 per cent annual return, which itself was the biggest yearly advance since the Global Financial Crisis.
As investors keep close tabs on a frenzied market environment – characterised by soaring oil prices, increasingly unpredictable crypto moves, and the continued challenge of greenwashing amid the rise of ESG – hedge funds seem particularly well-placed to tap into the desire for outsized gains.
Indeed, almost two-thirds (62 per cent) of all managers filing data with eVestment have attracted new money this year, the highest percentage since May 2016, which underlines the depth of allocator appetite for hedge fund strategies of all stripes.
But even as the coffers continue to fill up, many firms – especially those of the start-up and emerging variety – remain particularly cognisant of the altered manager-investor dynamic and the capital-raising challenges brought about by Covid-19, a point explored in-depth during the recent HedgeweekLIVE North America Emerging Managers summit.
The hurdles faced by those early-stage managers looking to get a seat at the table with allocators may be lower than in times past, but speakers suggested that fledgling funds should carve out more creative techniques and solutions when it comes to capital-raising, particularly as hybrid networking across both digital and face-to-face meetings becomes the norm.
Elsewhere this week, Brummer & Partners, the long-running Swedish multi-strategy hedge fund firm, announced it will redeem its entire investment in long/short credit manager Observatory, one of the underlying funds in the Brummer Multi-Strategy (BMS). The decision comes as Brummer plans to add more sector-specialist long/short equity market neutral strategies to its flagship vehicle.
Hugh Leask
Editor, Hedgeweek