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

The Essence of Marketing Strategy: Driving Business Success (Part II)
General Interest

The Essence of Marketing Strategy: Driving Business Success (Part II)

The Essence of Marketing Strategy: Driving Business Success
General Interest

The Essence of Marketing Strategy: Driving Business Success

Mastering Task Prioritization for Stress Reduction
General Interest

Mastering Task Prioritization for Stress Reduction

Crafting the Future: Delving into AI as a College Major
General Interest Information Technology

Crafting the Future: Delving into AI as a College Major

Mary-Kate Bula Selected as Assistant Coach of the USA Women’s Flag Football National Team
General Interest Pharma

Mary-Kate Bula Selected as Assistant Coach of the USA Women’s Flag Football National Team

Leveraging LinkedIn Polls: A Strategic Tool for Business Insights
General Interest

Leveraging LinkedIn Polls: A Strategic Tool for Business Insights

#WeAreGreenKey: Spotlight on Kyle Gierke
General Interest Healthcare

#WeAreGreenKey: Spotlight on Kyle Gierke

Essential Strategies for 2024: Remote Training
General Interest

Essential Strategies for 2024: Remote Training

Steps to Nurture a Multigenerational Workforce
General Interest

Steps to Nurture a Multigenerational Workforce

Tips to Cultivate a Compelling Employer Brand
General Interest

Tips to Cultivate a Compelling Employer Brand

Green Key Names 3 New Partners in 2024
General Interest

Green Key Names 3 New Partners in 2024

#WeAreGreenKey: Spotlight on Samantha Desena 
Accounting + Finance General Interest

#WeAreGreenKey: Spotlight on Samantha Desena 

Why Companies are Already Recruiting Interns for 2025
General Interest

Why Companies are Already Recruiting Interns for 2025

Todd Gabianelli Selected as an Old Master at Purdue University 
Pharma

Todd Gabianelli Selected as an Old Master at Purdue University 

Navigating the Surge of Respiratory Illnesses Across the U.S.
General Interest

Navigating the Surge of Respiratory Illnesses Across the U.S.

Gen Z: Catalysts for Workplace Evolution in 2024
General Interest

Gen Z: Catalysts for Workplace Evolution in 2024

The Office Real Estate Dilemma
General Interest

The Office Real Estate Dilemma

#WeAreGreenKey: Spotlight on Rich Egloff
Architecture + Engineering Leadership + Management

#WeAreGreenKey: Spotlight on Rich Egloff

From the Big Quit to the Big Stay
General Interest

From the Big Quit to the Big Stay

Wrapped up: Green Key Unlocked 2023
Accounting + Finance Architecture + Engineering General Interest Healthcare Information Technology

Wrapped up: Green Key Unlocked 2023

Latest Blog Posts
View All Posts
The Essence of Marketing Strategy: Driving Business Success (Part II)

The Essence of Marketing Strategy: Driving Business Success (Part II)

With a grasp of the fundamental concept of Marketing Strategy, let’s explore its advantages in more detail and uncover the...
Read More
The Essence of Marketing Strategy: Driving Business Success

The Essence of Marketing Strategy: Driving Business Success

In the intricate world of business, a marketing strategy serves as the cornerstone upon which companies build their path to...
Read More
Mastering Task Prioritization for Stress Reduction

Mastering Task Prioritization for Stress Reduction

Amid the hustle and bustle of modern life, juggling numerous tasks and responsibilities have become a common challenge for many....
Read More