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Alternative Market Briefing

Hedge fund of funds rebounded in the pandemic, build on positive momentum in Q1

Friday, April 16, 2021

Bailey McCann, Opalesque New York:

2020 was a surprisingly good year for fund of hedge funds, according to new data from Citco. Fund of hedge funds delivered an average return for the year of 11.2% with the median return at 9.9%. The year was especially good for larger funds. All funds above $500 million in assets registered a positive year and the average return of funds over $1Bn was 11%.

The data was generated from hedge funds Citco acts as administrator for.

Despite positive performance, asset flows were kind of a wash for hedge fund of funds. There were marginal net outflows of $1 billion across the asset class in 2020. Larger funds had a bit of an edge when it came to new allocations. According to the report, the bulk of inflows went to funds with over $500 million in assets. Smaller fund of funds tended to see outflows last year.

First quarter data indicates hedge fund of funds and single hedge funds are likely to keep up the positive momentum that started in 2020. Q1 was the strongest quarter for hedge funds since before the financial crisis. Overall, funds gained 6.1% despite some market volatility and continued uncertainty around inflation and the pace of economic recovery from the pandemic. The rebound has extended across strategies, including commodities funds which have had uneven performance in recent years.

Asset flows into hedge funds have also improved on the back of performance gains. Industry AUM is once again over $3 trillion and the i......................

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