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Alternative Market Briefing

Hedge funds gain +16.63% in 2020

Friday, February 05, 2021

Laxman Pai, Opalesque Asia:

Returns across hedge fund asset class were +16.63%, ahead of the S&P 500 PR Index (16.26%), resulting in the asset class' highest annual return since 2009, said Preqin.

"In 2020, the Preqin All-Strategies Hedge Fund Benchmark return was +16.63%," said the report.

Hedge funds also offered downside protection through lower levels of volatility over 2020 compared with the public markets. Equity was the best performing hedge fund strategy with a +19.64% return.

According to the report, hedge fund AUM grew, reaching $3.87tn as of November 2020, an increase of 6% compared with 2019. Hedge funds remain the second largest of the alternative asset classes after private equity.

Investors and managers were cautious, with investors placing smaller amounts of capital than previous years and managers launching fewer funds.

Liquidations outpaced new fund launches for only the second year in the past decade. During 2020, fund launches fell to 740, while the number of fund liquidations rose to 758.

Still, investors say the primary attraction of hedge funds is risk diversification, followed by low correlation to other asset classes. With this in mind, 73% plan to allocate the same or more capital to hedge funds in 2021 compared with 2020.

"Most investors (39%) are planning to increase their exposure to cryptocurrency/blockchain strategies; 26% expect to reduce their exposure to discretionary CTAs," Preqin said.

Almost two-thirds (63%) o......................

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