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AIMA, in partnership with Simmons & Simmons and Seward and Kissel, published the 11th quarterly Hedge Fund Confidence Index (HFCI), which provides a snapshot of fund managers' confidence in their economic prospects for the coming 12 months. A full time series of confidence levels since Q4 2020 can be found on the last page of this report.

Selecting the appropriate level of confidence, respondents are 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 months. When measuring their level of economic confidence, hedge fund respondents are asked to consider the following factors: their firm's ability to raise capital, their firm's ability to generate revenue and manage costs, and the overall performance of their fund(s).

The latest HFCI is based on a sample of 408 hedge funds (accounting for approx. US$3.34 trillion in assets and the largest ever HFCI in terms of the absolute number of respondents and overall AUM) that participated in the industry poll taken throughout the week ending 23 June 2023.

The average measure of confidence (in the economic prospects of their business over the coming 12 months) is +14.2, down from +16.3 in Q1 dragging the HFCI further away from the historic average of +17.5. The downturn comes despite the slightly greater percentage of respondents representing those managing more than US$1 billion in assets (77% in Q2 versus 71% in Q1) and the average AUM of respondents also increasing to US$7.9 billion, up by almost US$1 billion from the prior quarter - both historic indicators of greater confidence.

Tom Kehoe, Global Head of Research and Communications at AIMA, said: "In the face of prevailing macroeconomic and geopolitical concerns, we acknowledge the lower levels of economic confidence reported by hedge funds. News that central bank monetary policy is likely to diverge from the second half of this year should present more trading opportunities for hedge funds and the resultant next HFCI being more positive to the pattern set in the first half of this year."

Dev Saksena, Partner at Simmons & Simmons, said: "Despite a small drop in confidence among UK managers possibly due to a more challenging trading environment, we are still seeing a consistently resilient UK market. We have seen an increase in capital raising opportunities for UK managers from both the Middle East and other institutional investors. and positive performance results have also contributed to ensuring the overall trend over the last eight quarters remains positive in the UK."

Link: AIMA Hedge Fund Confidence Index (HFCI)