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Alternative Market Briefing

Other Voices: Top hedge fund industry trends for 2021

Tuesday, January 05, 2021

By: Don Steinbrugge, Agecroft Partners

1. Hedge fund industry AUM to reach all-time high driven by net inflows

Hedge fund industry assets will reach an all-time high in 2021 driven by one of the largest positive net inflows into the hedge fund industry in over a decade. Although the hedge fund industry has grown significantly over the past decade, the growth has been primarily generated by performance rather than positive net flows. Barclayhedge reports only $164 billion of positive net flows over the past 10 years and $283 billion of outflows over the last 3 years.

The market volatility of 2020 stress-tested the hedge fund industry and, for the most part, fund performance met investor expectations. Specifically, modest drawdowns in Q1 followed by a recovery and continued positive performance led to growing investor confidence. The growth in hedge fund industry aum will largely come from institutional investors allocating away from low yielding fixed income investments to hedge fund strategies with higher expected returns, as well as strategies that are uncorrelated to the performance of the capital markets.

2. Increased activity in hedge fund searches

Three factors will contribute to 2021 being one of the best capital raising environments that the hedge fund industry has seen in the past decade. First, as discussed in trend #1 above, we expect strong positive industry net asset flows.

Second, we see pent up demand for manager se......................

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