AIMA Hedge Fund Confidence Index Q4 2021

Published: 15 December 2021

The Q4 2021 edition of the global Hedge Fund Confidence Index (HFCI) offers the latest measurement of confidence that hedge funds have in the economic prospects of their business over the next 12 months. A product of AIMA, Simmons & Simmons and Seward & Kissel, the HFCI is published at the beginning of each quarter, providing a timely snapshot of the market.

Confidence numbers across the industry reported lower in Q4 amidst a number of headwinds emerging including challenging performance and prevailing regulatory and compliance issues. November performance figures saw hedge funds give back some of the gains made over the past 18 months as financial markets got spooked by renewed fears regarding the spread of the Omicron coronavirus variant and to what extent this would arrest the pandemic recovery. Inflationary concerns exacerbated the problem, with bond markets experiencing a difficult time resulting in some macro funds enduring a challenging end to the month. Regulatory and compliance headwinds have also picked up, with the pace of regulatory change accelerating in the UK and EU as each side seeks to forge a new path post Brexit while regulators in the US have hinted that asset management firms there are likely to see a greater volume of supervisory action over the coming year.

Despite these challenges, the mood across the industry remains upbeat with 90% of all respondents being positive about the economic prospects of their business over the coming 12 months. Notwithstanding the November performance setback, year to date, hedge funds on average are posting double-digit returns net of fees. Allocations to hedge funds continue to be brisk, including into new strategies (across both public and private markets) as investors look to the qualities of hedge funds to best manage any downside risk arising from market volatility and deliver on performance better than any other asset class.