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North America hedge funds 'most confident' for positive prospects in 2021 - new confidence index from AIMA

Monday, April 12, 2021
Opalesque Industry Update - The AIMA Hedge Fund Confidence Index (HFCI) is a new global index which measures the level of confidence that hedge funds have in the economic prospects of their business over the next 12 months.

AIMA today announces that according to the March 2021 HFCI, over 90% of participants cited a positive confidence measure when asked to choose from a range of -50 to +50, where +50 indicates the highest possible level of economic confidence for the firm over the next 12-month period and -50 indicates the lowest level of economic confidence for the firm over the same period.

A product of AIMA, Simmons & Simmons and Seward & Kissel, the HFCI is calculated at a specified point in time with the index published at the start of each quarter. Over 300 hedge funds participated in the Index, accounting for approximately $1 trillion in assets.

Breakdown of responses:

• The overall average measure of confidence is +18, a near 40% increase on the confidence level reported last quarter (December 2020) where there was a wide dispersion of confidence scores.

• 54% of responses came from larger funds (those that manage over $1billion in assets) while smaller funds (those that manage fewer than $1 billion) accounted for 46% of responses.

• Both large and small hedge funds express high levels of confidence, with large funds being most confident, on average scoring a rating of +19 compared to smaller hedge funds scoring a confidence rating of +17.

• Overall, hedge funds based in North America expressed the highest level of confidence (+20) whereas EMEA and APAC based funds confidence levels increased by 70% and 58% from Q4 2020.

• Hedge funds in the UK also expressed markedly higher confidence levels this quarter, up 60% on Q4 2020 to +16.

• Among the funds that reported to the HFCI this quarter, long/short equity, event driven funds, CTA and Managed Futures score the highest on confidence.

Tom Kehoe Global Head of Research and Communications at the Alternative Investment Management Association (AIMA) commented: "As we move into the second quarter of this year, hedge funds enjoy a healthy level of confidence with the promise of greater times ahead. Further reasons for the industry to be cheerful include a continued strong appetite among investors for hedge funds while the pipeline for new fund launches remains resilient."

Devarshi Saksena, Partner - Simmons & Simmons commented "The trends in the Index show growing optimism amongst hedge fund managers as we emerge from lockdown. This chimes with what we are observing at Simmons & Simmons in terms of enhanced new hedge fund launch activity and increased inflows into existing hedge fund products. The pipeline for new fund launches looks to be resilient as we move further into 2021."

Steve Nadel, Partner - Seward & Kissel added "The increase in confidence for hedge fund managers from Q4 2020 to Q1 2021 is significant but not surprising given the transition in power with the new US administration and what is perceived to be a more predictable administration. Additionally, scale of vaccine distribution has been promising and leads us to believe that we are one step closer to a return to normalcy."

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