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Hedge Fund Managers Increasingly Bullish About Economic Prospects

The March 2021 results of the AIMA Hedge Fund Confidence Index shows that the global hedge fund industry is overwhelmingly positive about the outlook for their businesses in the coming twelve months.

AIMA's HFCI asks managers 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, to describe their bullishness - or bearishness - about their firm's (and therefore funds') prospects. Over 90% of participants cited a positive confidence measure this quarter.

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. 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. 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. 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 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 at Simmons & Simmons, said: 

“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 at 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.”

The HFCI is published by AIMA, Simmons & Simmons and Seward & Kissel, and 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 $1trn in assets.

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