A new global confidence index of hedge funds managing $1 trillion indicates uniform optimism for the year ahead, with the most positivity coming from the North American and UK markets.
In the first quarter of 2021, a survey of over 300 hedge fund managers collectively managing $1 trillion revealed that over 90 per cent of them were positive about the economic outlook for the year ahead. The survey, conducted by the Alternative Investment Management Association, found that UK-based funds’ confidence levels were up by 60 per cent from sentiment expressed in December 2020 as UK financial services began navigating a post-Brexit course and towards a post-COVID recovery.
The results are part of the AIMA’s Hedge Fund Confidence Index (HFCI), a new index measuring confidence across the sector specifically focused on the economic prospects of their business over the next 12 months.
The group said the trend is “significant but not surprising” given the transition in power in the US and what is perceived as a more predictable administration. “Additionally, scale of vaccine distribution has been promising and leads us to believe that we are one step closer to a return to normalcy,” Steve Nadel, said, a partner at Seward & Kisset, one of the firms contributing to the new index.
Overall confidence levels were up by 40 per cent on the last quarter, with both large and small hedge funds communicating high levels of confidence. North American-based hedge funds expressed the highest level of confidence, with EMEA and APAC-based funds trailing; and confidence among hedge funds in the UK was also markedly up on the previous three months.
Broken down by funds, long/short equity, event-driven, commodity trading advisor, and managed futures sectors scored the highest confidence levels for the year ahead.
“The trends in the index show growing optimism amongst hedge fund managers as we emerge from lockdown. This chimes with what we are observing in terms of enhanced new hedge fund launch activity and increased inflows into existing hedge fund products. The pipeline for new fund launches looks to be resilient as we move further into 2021,” Devarshi Saksena, partner at Simmons & Simmons said; the firm is another research partner in the survey.
The sector has had a rocky time of late beginning with the populist-driven GameStop saga, followed soon after by the collapse of Archegos Capital, the hedge fund run as the family office of Bill Hwang.