Hedge fund confidence on the rise

The AIMA Hedge Fund Confidence Index is on the rise, especially among North American hedge funds, hedge funds with more than $1 billion in assets and among firms offering long/short equity, event driven, CTAs and managed futures strategies. The figures are based on a sample of more than 300 hedge funds that total roughly $1 trillion in assets. The measure is of confidence in the economic prospects of their business over the coming 12 months, which currently sits at 18, or a 40% increase on the confidence level reported by hedge funds last quarter. Still more than 90% of the hedge funds that reported their confidence level in the first quarter were upbeat. The AIMA Hedge Fund Confidence Index (HFCI) is a new global index that is produced by 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. The survey of hedge fund managers found that despite increased industry headline risk, confidence levels among hedge funds continue to increase. Both the Gamestop and Archegos incidents being relatively short-lived with global markets ending the first quarter on a positive note. The wider availability of multiple COVID-19 vaccines and pandemic restrictions being slowly lifted, has helped fuel cautious optimism exists that the worst of the pandemic is behind us. According to AIMA, industry confidence is rising amidst strong quarterly performance and net inflows. Officials said, prospects for the hedge fund industry are as strong as they have been in several years with the industry returning another solid set of results in the first three months of this year. According to recent HFR figures, hedge funds gained 6.1% in the first quarter, which is the strongest first quarter since 2000. In comparison to the Q4 2020 index where there was a wide dispersion in confidence scores, hedge funds regionally are expressing near similar confidence levels. North America based hedge funds are expressing the highest level of confidence with an average confidence rating of +20 with EMEA and APAC based funds scoring +17 on average (up 70% and 58% respectively from Q4 2020). Hedge funds in the UK also express higher confidence levels of +16 (up 60% on Q4 2020). Observing the funds confidence level based on their size, officials split the sample group into firms with $1 billion plus in assets and those with less than $1 billion. They found both large and small hedge funds express high levels of confidence with larger firms being the most confident with a rating of +19 versus their smaller counterparts scoring a confidence rating of +17. The launch environment is exceptionally strong especially among hedge fund firms that have a pre-existing relationship with investors. AIMA cited eVestment’s estimate of $24 billion in net inflows in the first two months of this year making it the best two months start since 2014. Among the more popular launches include specialist sector equity strategies, macro funds, SPVS, closed-end products to more opportunistic products like SPACS. With respect to emerging managers, the fundraising market is still challenging, as any efforts to allocate are concentrated among managers that have pre-existing investor relationships and/or a strong track record.