After a year of massive upheaval, allocators named risk management as their number-one objective moving into 2021 - something they believe hedge fund managers are best placed among alternative asset classes to deliver. Diversification and niche opportunities are also key hedge fund selling points.
Based on surveys and interviews conducted with 65 alternatives investors and 135 senior hedge fund IR and marketing professionals during Q4 2020, Investor Intentions H1 2021 provides hedge fund managers with a window into the thinking of prospective clients, and investors with critical intelligence on the plans and sentiment of their peers.
Investors were more likely to be "very satisfied" with their hedge fund portfolio than any other alternative asset class in 2020, with private debt achieving a greater overall satisfaction rating in our survey.
And while performance concerns have been a bugbear of investors for several years, in 2020 hedge funds not only met, but exceeded investor expectations in this regard. Managers must be careful to avoid becoming victims of their own success in 2021, with performance expectations now set even higher.
Satisfaction is feeding through to investment plans, with over 40% of investors surveyed expecting to allocate more capital to hedge funds in H1 2021. The outlook for alternatives more broadly is also strong. All alternative asset classes will see a boost, compared to long-only products where money is likely to flow out of fixed income funds.
For their part managers expect to focus their efforts on the vast North American market, with single and multi-family offices, as well as endowments and foundations, key targets for hedge fund IRs. While investors expect to formally meet with an average of 15 new hedge fund managers during the first half of the year, many of these meeting are still likely to take place via Zoom.
Indeed, despite three vaccine candidates having shown a high degree of efficacy at the time of writing, managers still expect socially distanced forms of interaction to be the most fruitful sources of new leads in H1 2021. Initial scepticism of virtual cap intro events has worn off and managers are embracing new ways of capital raising that will likely endure, at least in part, when the Covid-19 pandemic draws to an end. All in all, hedge funds are beginning 2021 on a positive note and primed for growth in the year ahead.
Managing Director, Global Head of Research and Communications, AIMA
Head of Investor Research, PCFI
About the research
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 intend to raise assets in H1 2021.
In addition, HFM Pageant Media and AIMA canvassed the views of the industry via one-to-one interviews with hedge funds and investors. Reference to these discussions are included in this report.
Thanks to our participants
On behalf of HFM Pageant Media and AIMA, we would like to thank everyone that participated in the survey and shared their insights.