Group Co.
Agecroft’s Top Hedge Fund Industry Trends for 2018
Traders Magazine Online News, January 4, 2018
Each year, Agecroft Partners predicts the top hedge fund industry trends stemming from our contact with more than two thousand institutional investors and hundreds of hedge fund organizations. The hedge fund industry is dynamic, and participants are best served by anticipating, rather than reacting to, change. Below are Agecroft’s 9th annual predictions for the biggest trends in the hedge fund industry for 2018.
Hedge fund industry assets to reach an all-time high in 2018 for the 10th year in a row
Despite the plethora of negative articles about the hedge fund industry, hedge fund assets have reached an all-time high 5 quarters in a row. There is clearly a disconnect between the mainstream media’s coverage of the industry and the reasons why investors continue to allocate to hedge funds. Across the hedge fund investor landscape, we see a significant improvement in sentiment towards the industry. We forecast that industry assets will grow by 5.5% over the next 12 months.
Large rotation of assets based on changes in strategy preferences and relative performance of individual managers
While the past few years have been challenging for the performance of hedge fund indices, we have seen large dispersions of performance across strategies and among managers with similar styles. Some strategies and individual managers have performed quite well. Underperforming managers will experience above average withdrawals as investors grow increasingly impatient with disappointing performance from high priced investment structures. Some of these assets will be reinvested with better performing managers in the same strategy. Most will flow into other strategies as investors re-position their portfolios based on where they think active managers have more opportunity to add value.
Strategies that will lose assets include:
- Traditional long/short equity focusing on the developed markets. A large percent of managers have delivered negative alpha over the past 5 years. Investors have become overwhelmingly disappointed in, and will continue to withdraw from managers who consistently fail to deliver on their value proposition
- High beta fixed income managers. Many investors believe that these managers face strong headwinds with rising interest rates and widening spreads.
For more information on related topics, visit the following channels:
Comments (0)