Alternative Investments/Hedge Funds: Inflation Fears Boost Hedge Funds’ AUM To Nearly $4T

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Meanwhile, hedge funds reported the best first-half performance since 2009.

A market survey by alternatives technology provider Vidrio Financial shows that fears of inflation have helped move substantial fund allocations during the first half of 2021 to alternative assets such as private equity and hedge funds. Historically, market sentiment has tended to favor these asset classes during inflationary periods in the economy. Total hedge fund assets burgeoned to nearly $4 trillion by the end of the period, according to HedgeWeek.

Vidrio Financial Allocator Market Survey

Vidrio’s late-June survey of 4,500 institutional investors holding assets worth about $100 billion found the following trends to protect from inflation:

  • 10% of respondents had signifcantly adjusted portfolios to include more alternatives
  • 70% had made only moderate adjustments
  • 20% had not yet made such adjustments but were planning to do so

On strategies preferred by investors the survey found:

  • Commodity funds – 44%
  • Macro hedge funds – 33%
  • CTAs/tail risk funds – 22%

“Many large institutional investors have made shifts to their portfolios on the margin to counteract potential near-term inflationary issues with alternatives benefiting, though many allocators were sanguine that even after a 40-year bull run in Treasuries any rise in inflation would not have a significant impact on overall portfolio returns,” said Gygmy Gonnot, managing director, head of Vidrio Research.

Meanwhile hedge funds have been having a robust year in terms of returns, according to reports.

Hedge funds: Strong returns in the first half

HedgeWeek reported that hedge funds gained more than 10% during the six months of 2021.

That represented the industry’s best first-half performance in 22 years.

HFR president Kenneth Heinz said that hedge funds were “positioning for a dynamic performance environment which may shift rapidly as a function of political developments, new information on virus mutation and vaccine efficacy.”

Related Story:    Man Group Reports Alternatives Funds AUM At $77.2B                                                

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