“HEDGE FUNDS SEE 90% APPROVAL RATING FROM INVESTORS IN 2020” HFM AND AIMA FIND

• Over 40% of investors plan to increase their allocation to hedge funds in H1 2021
• Q4 2020 study of investors with $3.8 trillion total assets found funds exceeded investor performance

Investor Intentions H1 21, a new report by business intelligence provider, HFM, and the Alternative Investment Management Association (AIMA), the global representative of the alternative investment management industry, has found that over 90% of investors were satisfied with the performance of hedge fund investments in 2020*, after hedge funds having exceeded expectations and overdelivered on returns last year.

The research, conducted in Q4 2020, surveyed 65 investors (with US$3.8 trillion in total investor assets, US$156 billion of which is invested in hedge funds) and senior IR and marketing professionals from 135 hedge fund managers to discover the changes allocators plan to their portfolios and how hedge fund managers plan to raise assets in H1 2021:

• 45% of investors plan to increase their allocation to hedge funds, with more than half maintaining their allocation to other alternative investments.
• The expectation of even stronger returns is the principle reason (64%) for this increase, followed by equity valuation concerns (39%). Meanwhile, 32% of investors regard hedge funds as a possible long-term replacement for fixed income due to the continuing low rate environment.
• A quant revival is expected in 2021 with systematic firms most likely among hedge fund strategies to see an increase in allocations in H1. 31% of investors are considering allocations to quant strategies, closely followed by arbitrage/relative value (29%) and global macro (25%).
• Risk management is investors’ top priority in H1 2021 (97%), which they regard hedge funds as being best placed to deliver among alternative asset classes.
• Investors are still prepared to pay higher fees, provided strong risk-adjusted returns are delivered.
• Hedge fund managers are increasingly broadening their offering to include long-only and private markets products, with over a quarter of managers already offering or planning to offer private credit funds.

When it comes to winning new business globally, hedge fund IRs are on the hunt for investors located in the US with efforts focused on endowments, single and multi-family offices.

Referrals from existing clients (38%) are expected to provide the most promising new investor leads for hedge fund investor relations professionals, while the continued rise in Covid-19 case numbers globally means hardly any hedge fund managers (3%) believe in-person cap intro events will prove the best source of new leads.

HFM’s Chief Data Officer Elias Latsis said: “Despite a challenging market environment in 2020 hedge funds were able to fulfil their intended role in investors’ portfolio, namely delivering risk management and downside protection. This bodes well for hedge funds in the year ahead, but managers must avoid becoming victims of their own success with performance expectations now set even higher. ”

HFM’s Head of Investor Research James Sivyer said: “Our research shows that 63% of family offices and high net worth individuals plan on increasing their hedge fund allocation in the first half of 2021. Hedge fund IRs are keenly aware of this demand for their products among private wealth allocators, with most of their top investor targets in H1 falling into the private wealth bracket”.

Tom Kehoe, Managing Director and Global Head of Research and Communications at AIMA added, “The environment and implications from COVID-19 demonstrated that in times of market volatility and business uncertainty, alternative investments fulfil an increasingly important role in an investor’s portfolio. With 2020 seeing both strong performance and high investor satisfaction, 2021 could see a renewed interest in hedge funds amongst investors, allocating to both public and private markets as they seek diversification away from low interest bonds and high valued equities.”

Notes for editors

* Hedge funds reported a 51% "very satisfied" rating compared to other alternative asset classes though they received the second highest overall satisfaction rating of 91% behind private credit at 93%. They have exceeded investor performance expectations in 2020, delivering 0.6% percentage points more than expected for 2020.

For media enquiries, please contact:

HFM

James Sivyer

Head of Investor Research

[email protected]

+44 (0) 20 7832 6648

Christine Chng

Head of Marketing and Communications

[email protected]

+65 6212 0908

AIMA

Hume Brophy

[email protected]

+44 (0) 7772124299

About AIMA

The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with around 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2 trillion in hedge fund and private credit assets. AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes, and sound practice guides. AIMA works to raise media and public awareness of the value of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. The ACC currently represents over 170 members that manage $400bn of private credit assets globally.  AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors).

About HFM

HFM provides hedge fund professionals with an unparalleled blend of business essential data, exclusive industry intel and market-leading events. Combining 22 years of industry heritage with a cutting-edge platform, to create true business intelligence; the intelligence needed to raise assets, allocate funds or source new business opportunities. Insights is the research and analysis service from Pageant Media, sitting within the company’s hedge fund intelligence network, HFM. The division produces research reports and analytical articles on a variety of topics in the global hedge fund industry, including business operations, investor relations, technology and regulation. Leveraging Pageant’s wealth of data and news sources, and with access to the HFM network’s vast membership, Insights is uniquely positioned, offering exclusive surveys and expert commentary.