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Alternative Market Briefing

Other Voices: Seven ways the effects of the coronavirus will impact the hedge fund industry

Thursday, March 19, 2020

amb
Don Steinbrugge
By Donald A. Steinbrugge, founder and CEO, Agecroft Partners, LLC:

The changing landscape caused by the Coronavirus will lead to the largest shake out in the hedge fund industry since the 2008 market crash. Below are some of the ways we believe the Coronavirus will impact the hedge fund industry.

1. Change how people communicate - The Coronavirus will radically change how people communicate and interact within the hedge fund industry. There has been a significant increase in people telecommuting from home and an almost complete stoppage of in person meetings. The hedge fund industry will quickly embrace video technology, which minimally requires a computer and telephone.

2. Most investors will be satisfied with how their hedge fund portfolio performed. Through mid-March, the HFRX hedge fund index was down 4.26% which is in line with expectations as compared to a 60/40* balanced portfolio down 8.79% through March 15. Larger price movements provide more opportunities for skilled hedge fund managers. It creates an environment in which managers can add value through security selection in strategies that capture greater price distortions in the market. It can also accelerate performance as security prices more quickly reach targets.

3. Temporary contraction in the hedge fund industry. Despite most investors being satisfied with performance, we expect the hedge fund industry assets under management to temporarily decl......................

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