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Hedge Funds Shone In 2020, Family Offices Eye Higher Allocations

Tom Burroughes, Group Editor , 22 January 2021

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The global hedge fund sector has ended up having a robust 2020, pushing back against some of the difficult times it has experienced in recent years, new figures show. A recent poll of family offices worldwide also shows they want to put more capital into the space.

A barometer of hedge fund returns from research firm Preqin showed that these entities chalked up a 16.69 per cent return last year, notching up a 3.99 per cent result in December and a sharp turnaround in fortunes after markets were hammered earlier in 2020.

Equity strategies had the best result for 2020, at 19.59 per cent in 2020, just ahead of event-driven strategies (13.28 per cent) and macro strategies (12.72 per cent), the firm said in a report. 

The global hedge fund sector has ended up having a robust 2020, pushing back against some of the difficult times it has experienced in recent years. According to Hedge Fund Research, the Chicago-based firm, the industry held $3.6 trillion at the end of 2020, a quarterly increase of $290 billion, setting a record for total AuM.  That organisation’s HFRI Fund Weighted Composite Index®, HFR’s proxy for the global hedge fund industry, rose by 10.7 per cent in the fourth quarter of 2020, recovering from the early 2020 decline to bring 2020 performance to +11.6 per cent.

Back to Preqin’s figures, dollar-denominated hedge funds were the best performing in December, gaining 4.68 per cent and finishing last year with a 20.60 per cent return for the whole year.

The results came out a few days after BlackRock, the world’s biggest asset manager, issued a survey of 185 family offices globally and showed that 38 per cent of them intend to bump up exposure to hedge funds. That study showed that on average, family offices allocate about 35 per cent of their portfolios to alternative asset classes such as hedge funds and private equity.

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