Alternative Investment Management Association – Industry view


folio allocation will see alternative investments play a greater role in investor preference, with hedge fund investing be- coming more prominent.


Tom Kehoe is global head of research and communications at the Alternative Investment Management Association (AIMA)


KEY TRENDS THAT COULD IMPACT HEDGE FUNDS IN 2021


In the face of unprecedented global dis- ruption arising from the Coronavirus pandemic, assets under management for the hedge fund industry continue to break new records. The coming year is likely to see an acceleration of trends as the industry becomes more digitalised, more socially conscious and plays an in- tegral part in the economic recovery from Covid-19. Below are the key trends that we see impacting the hedge fund indus- try in 2021.


Hedge funds to witness a renais- sance


Strong hedge fund performance through 2020 in navigating a series of market drawdowns has not gone unnoticed by in- vestors who report that hedge fund alloca- tions have either met or exceeded their ex- pectations.


This sentiment has been


loudly echoed through conversations we have held with asset allocators who are re- inforcing their interest in alternative in- vestment funds. A major rethink on port-


New blueprint for hedge fund op- erating model to emerge Having most of the world forced to work from home reshaped how businesses conducted their operations during 2020. More than most, hedge funds proved themselves to be highly adaptable and re- silient in the face of a massive disruption. With the end of the pandemic in sight, business operating models are being re- evaluated as hedge funds examine core processes,


cost structures and hybrid


working environments as they strive for efficiency in a new normal.


Culture to dominate the talent management revolution While Covid-19 has caused job losses across the financial services industry, hedge fund managers continue to seek out the best talent while remaining mind- ful to also look after their own people. Defining a clear strategy as the industry considers the future of the workplace over the coming years will be critical. Related to a firm’s culture, talent flight is now the number one risk to long-term growth.


Digital transformation of the in- dustry to continue apace Many industries have started to include the use of alternative data as a key part of their business-decision making process- es. We see a lot of opportunity for techno- logical innovation to gain insights from


alternative data and seamlessly integrate it into the investment process. Elsewhere, the ecosystem for crypto-cur- rencies and digital assets continues to de- velop. The past year has seen more hedge funds emerge with an increasing number of investors examining opportunities in blockchain and the distributed ledger technology (DLT) space.


ESG and responsible investment to grow in importance


Environmental issues and social justice movements continue to dominate the news. 2021 will see efforts ramped up to integrate ESG and responsible


invest-


ment (RI) across investment products universally. Sustainable finance is here to stay. At AI- MA, we believe that alternative assets bring unique skills to the world of respon- sible investment given their flexibility and sophistication.


Private credit to play an integral part in the economic recovery The value of private credit to investors and borrowers was subject to a rigorous examination during 2020. The pan- demic has challenged the viability of many businesses and the jobs they pro- vide. Governments around the world have provided unprecedented liquidity support yet many borrowers found themselves unable to access such schemes. A key finding from ACC’s Fi- nancing the Economy notes that private credit managers helped fill this funding gap and plan to be just as active this year as this credit cycle will continue to create opportunities.


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ISSN: 2045-3833 Issue 99 | December–January 2021 | portfolio institutional | 15


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