Hedge Funds Ended Year with a Strong Finish

“Hedge funds performed well in 2020,” says the alternative assets intelligence firm Preqin.

With returns of 16.63% across all asset classes, hedge fund returns were ahead of the S&P 500 PR Index, which closed the year at 16.26%, according to the 2021 Preqin Global Hedge Fund Report. It was the asset class’ highest annual return since 2009.

Preqin said the best performing strategy was equities, with a 19.64% return. Credit strategies provided the lowest returns at 5.24%.

In addition to a strong upside, Preqin said, “Hedge funds also offered downside protection through lower levels of volatility over 2020 compared with the public markets.”

Accounts under management grew by 6% over 2019 to $3.87 trillion as of the end of November. Though modest, it was a significant turnaround from the first two quarters of the year when investors fled the sector for the lower cost and more passive UCITS (Undertakings Collective Investment in Transferable Securities) and ETFs (exchange traded funds).

“The direction of flow reversed in the third quarter,” Preqin says, “Suggesting an increasing investor preference for active management over tracking.”

As cautious as investors themselves, hedge fund professionals launched significantly fewer new funds. Liquidations exceeded new funds by 758 to 740 for “only the second year on record,” said Preqin. The previous time that happened was in 2019.

Still, Preqin listed 18,303 funds at the close of 2020, just behind the record of 18,391 recorded in 2018.

The report identifies what it describes as five “megatrends,” themes that will continue to shape the hedge fund industry:

  1. ESG – Typically described as social investing, ESG considers environmental, social, and governance issues in deciding on investment. Preqin says ESG “has moved into the mainstream and is a key consideration” for investors and fund managers.
  2. Capital consolidation – “Established managers are taking a growing share of capital raised across all alternative asset classes.”
  3. Diversification — Since 2016, investors’ primary reason for allocating to hedge funds has been diversification, says Preqin. That will continue, predicts the report, as “investors are more focused on low correlation than returns.”
  4. Customized solutions – The shift away from fund products can offer lower fees and allow investors and managers to take part in opportunities more equally.
  5. Rising allocation to alternatives – “Investors are increasing their alternatives allocations to produce better risk-adjusted returns and protect the downside.”

Preqin’s head of research insights David Lowery says, “After nine consecutive quarters of outflows, Q3 2020 marked the first quarter of net inflows, bringing much-needed optimism to the hedge fund industry. Established managers are taking a growing share of capital raised across all alternative asset classes, but investors are seemingly aware of the benefits of investing in first-time funds and are taking advantage of the large supply.”

Photo by Chris Liverani on Unsplash

#WeAreGreenKey: Spotlight on Anthony Agosto
Accounting + Finance General Interest Green Key News Human Resources Leadership + Management Worklife

#WeAreGreenKey: Spotlight on Anthony Agosto

Shop for Jobs this Holiday Weekend
General Interest Green Key News Human Resources Worklife

Shop for Jobs this Holiday Weekend

Thankful for Our Community this Thanksgiving
General Interest Green Key News Leadership + Management Worklife

Thankful for Our Community this Thanksgiving

Green Key Unlocked: Behavioral Interviews in IT
General Interest Green Key News Information Technology Worklife

Green Key Unlocked: Behavioral Interviews in IT

#WeAreGreenKey: Spotlight on Stu Leifer
Accounting + Finance General Interest Green Key News Worklife

#WeAreGreenKey: Spotlight on Stu Leifer

#WeAreGreenKey: Spotlight on Sam Jaberi
General Interest Green Key News Information Technology Worklife

#WeAreGreenKey: Spotlight on Sam Jaberi

Preparing for Different Types of Interviews
General Interest Green Key News Human Resources Worklife

Preparing for Different Types of Interviews

Benefits of Working Hybrid
General Interest Green Key News Worklife

Benefits of Working Hybrid

Green Key Unlocked: How to Succeed in Desktop Support
General Interest Green Key News Information Technology Worklife

Green Key Unlocked: How to Succeed in Desktop Support

#WeAreGreenKey: Spotlight on Andrew List
Financial Services General Interest Green Key News Worklife

#WeAreGreenKey: Spotlight on Andrew List

How to Improve Sleep Hygiene (For a Better Work-Life Balance)
General Interest Green Key News Healthcare Worklife

How to Improve Sleep Hygiene (For a Better Work-Life Balance)

#WeAreGreenKey: Spotlight on Karlina Cordero
General Interest Green Key News Human Resources Worklife

#WeAreGreenKey: Spotlight on Karlina Cordero

How to Ask for a Raise
General Interest Green Key News Worklife

How to Ask for a Raise

#WeAreGreenKey: Spotlight on Brittany Kinsella
General Interest Green Key News Leadership + Management Worklife

#WeAreGreenKey: Spotlight on Brittany Kinsella

Green Key Unlocked: Why Green Key?
Accounting + Finance Architecture + Engineering Financial Services General Interest Green Key News Healthcare Human Resources Information Technology Leadership + Management Legal Support Marketing Technology Pharma Professional Support Worklife

Green Key Unlocked: Why Green Key?

#WeAreGreenKey: Spotlight on Samantha Leveille
Architecture + Engineering General Interest Green Key News Worklife

#WeAreGreenKey: Spotlight on Samantha Leveille

How to Answer Salary Expectations
General Interest Green Key News Worklife

How to Answer Salary Expectations

#WeAreGreenKey: Spotlight on Sean Coyne
Architecture + Engineering General Interest Green Key News Worklife

#WeAreGreenKey: Spotlight on Sean Coyne

Questions to Ask During a Job Interview
General Interest Green Key News Human Resources Worklife

Questions to Ask During a Job Interview

#WeAreGreenKey: Spotlight on Angela Singh
General Interest Green Key News Human Resources Worklife

#WeAreGreenKey: Spotlight on Angela Singh

Latest Blog Posts
View All Posts
#WeAreGreenKey: Spotlight on Anthony Agosto

#WeAreGreenKey: Spotlight on Anthony Agosto

Anthony has been with Green Key for over eight years and has played an integral role in the success of...
Read More
Shop for Jobs this Holiday Weekend

Shop for Jobs this Holiday Weekend

This coming weekend may call for hearty food, crazy sales, and some quality down time to unwind. But while you're...
Read More
Thankful for Our Community this Thanksgiving

Thankful for Our Community this Thanksgiving

As Thanksgiving approaches, we'd like to take the time to thank our amazing Green Key community! This includes all of...
Read More