Alternative Markets Outlook 2021
The year 2020 was dominated by Covid-19 and this is likely to continue in 2021, hopefully to a lesser degree with the vaccination programs running. Two major impacts, which can affect 2021 substantially are the effectiveness of the vaccination against certain mutations of the virus that emerge more and more. While Pfizer/ BioNTech stated that their vaccine is likely to effectively protect against the UK mutation, J&J said that their trial results do not effectively protect against the South African and Brazilian variant. The second major aspect around Covid-19 in 2021 addresses the production quantity of the vaccines and when a critical mass of immunization in countries is reached. The fight from central banks against the economic damage caused by Covid-19 is likely to continue, although not nearly with the same numbers as in 2020. Interest rates are likely to remain close to zero with a tendency of higher interest rates with a long-time horizon. Despite the great performance of gold in 2020, it underperformed since reaching its peak in August 2020, mostly remaining at the $1,850 per ounce level and in 2021 so far, it dropped below $1,700, despite frequent projections for gold of around $2,500 up to $3,000 per ounce in 2021. It remains to be seen whether gold can reach this level. Gold has seen a lot of inflows during 2020, in particular in ETFs, but has also faced redemptions for reallocation towards well-performing equities and its digital alternative Bitcoin (BTC). Another important factor for gold is whether the anticipated inflation emerges or not. Another seemingly unhealthy development is the deviation from stock prices and the real results of the economy. This development can be explained partly by the tremendous money printing in 2020, as this cash needs to be deployed somewhere and bonds with zero percent interest are no alternative anymore.

​Hedge Funds
The last two years were exceptional for hedge funds. In 2019, hedge funds achieved a return of 9%, the best return in the decade back then. 2020 was even better with an average return of approximately 17%. Figure 1 shows the returns over the last three years of the flagship funds of the top-earning managers. Across all years, there were huge deviations in their yearly performance results. In 2019, the returns fluctuated between 10% up to 60% returns. In 2020, the returns shifted in an ever more positive direction, as the lowest return was 14%, whereas the highest achieved return is 76%. In comparison, the average of our strategies returned 68% this year and Figure 2 shows a distribution of returns of our strategies. 2019 and in particular 2020 has helped the industry to be in demand again, after rough years before, as hedge funds managed to reduce the downside risks of the Covid-19 crisis but also performed well in the bull run after the initial dip. Due to the increased demand on hedge funds that emerged in 2020, it is likely that the AuM of the industry will increase quite substantially in 2021, especially if equity markets should continue to perform as well as they are doing currently. This would boost the AuM of the industry both by net inflows and by the intrinsic growth through performance of funds. The institutional demand is driven mostly by the performance in 2020 and the expected market volatility in 2021.

​Alternative Markets Review 2020
2020 will be certainly a year nobody will not forget very fast. The most notable event was certainly Covid-19 and its tremendous impact on the everybody in the entire world. From a financial perspective, there were so many exceptional phenomena that occurred as a consequence of Covid-19. Firstly, national banks have intervened in the market to an extent that was unprecedented, the FED above all. The huge interventions of the FED through quantitative easing in GFC in 2008 were next to nothing to the interventions following Covid-19. The common measures of national banks in particular adjusting interest rates was exerted quickly, which led to the interventions through other channels as described previously. Almost all industrialized countries are now facing interest rates that are negative or very close around 0%, including a yield curve inversion in the US during the pandemic. Governments have also provided huge sums of financial aids for the economy to fight Covid-19, which led to record level of governmental debt. In the US, the debt level is almost as high as during WW2, which says a lot. Low interest rates fuelled the rally of safe haven asset such as gold further, which had a great year, despite having gained already a lot in 2019 from the trade war between the US and China.

Hedge Funds
Hedge funds had a great 2020, despite the severe drawdowns in March and April. Preqin reports that the average hedge fund achieved a YTD in 2020 of 16.69%. Figure 4 shows an overview of the returns of our hedge funds across fixed income, equity, tactical trading and fund of hedge funds (FoHF) strategies. Over all categories, our average hedge fund is up 68% in 2020, largely driven by crypto hedge funds which posted stellar returns as cryptocurrencies, which will be discussed in the part. Our tactical trading strategies are up 279% in 2020, as of most of those strategies are crypto-related. The equity-based hedge funds achieved a YTD of 23.8% in 2020, which a substantial variance across the hedge funds, largest based on the strategy pursued. Fixed income-based hedge funds struggled longer in 2020, as both equity and tactical trading strategies recovered very fast. Fixed income strategies are up 6.7% in 2020. Figures 5 to 8 show the performance of the strategies compared to respective benchmarks.

Alternative Markets Update January 2021
For Ethereum (ETH), the development from end December 2020 to mid-January 2021 was even better for ETH, as it surged from $600 to $1,350 on 10th January 2021. Figure 2 shows the development of ETH during 2020 and in early 2021. The huge jump from $900 to $1,200 happened just a few days after Winklevoss pointed out that ETH is easily the most undervalued cryptocurrency. That argument seems reasonable, especially when considering that in the 2017 bull run ETH was worth around $1,500 when BTC was just below $20k. However, now ETH is still significantly below the mark from 2017, whereas BTC is already worth more than double than it what it was back then.

Commodities had a very rough year in 2020, despite recovering most of their losses. Figure 3 shows the CRB Commodity Index over 2020. From its low in April, caused by Covid, it gained 70% as of early January 2021. One extreme example of this development is crude oil, whose futures were negative in March 2020, and is now trading at around $50 per barrel, which is almost at the price levels prior to Covid.

Alternative Markets Update December 2020 
Unsurprisingly, BTC tops this chart with an annualized return of 206.4% and a great 2020 so far with 188%. The next most successful asset class are US stocks with an annualized return above 10%, as well as being up more 16% for 2020. Our equities rose on average 7.6%, with two strategies performing exceptionally well. The Long / Short US Equities Consumers, TMT, Healthcare strategy and the Long / Short US Equities Disruptive Technologies strategies are both up more than 57%. Gold that ranks third in this year’s return, despite a continued fall since reaching its peak in August, is the third worst performing asset class over the last ten years, even though it retuned 17.9% and 22.4% in 2019 and 2020. The worst performing asset class are other commodities with an annualized return of -6% over the last ten years.

Alternative Markets Update December 2020
​The following Figure shows the 30Y return of the best performing stocks in the S&P 500 during the last 30 years. According to Paul Tudor Jones, BTC can be viewed similarly as internet stocks back in 1999. He argues that these kinds of assets are similar, as there is or was no appropriate to measure their value, as it is currently the case for cryptocurrencies and has been in 1990 with internet-related stocks. Their returns also look similar, as they rose extremely quickly but had a major crash. For BTC that would 2018 and for the internet stocks it is known as the dot-com bubble in 2000. However, both assets have recovered quickly. Internet stocks are now the most valuable stocks like FAANG and ATM in China and it does not seem unlikely that a similar development could occur for cryptocurrencies. Therefore, the two major cryptocurrencies BTC and Ethereum (ETH) are compared to Figure 3. As a basis, the value of a cryptocurrency at inception is seen as its first trade. For BTC this would be a value of $0.000994. The first known sale of BTC in exchange for fiat occurred on Oct. 12 2009 when Finnish developer Martti Malmi sold 5,050 BTC for $5.02, with the fiat amount transferred via Paypal. For BTC, this leads to a staggering return since its inception of 1’919’430’484% over 11 years and easily tops the stock return list. For ETH this value is 204’962%, which would make the stock list on fourth place after Bitcoin, AMZN, MNST and JKHY within 6 years of the first traded price. ETH’s sale started on July 22 2014 at midnight in Switzerland. At the start of the sale and for fourteen days the price was set so that one BTC bought 2,000 ETH. At the end of the 14-day period the amount would decline linearly to a final rate of 1,337 ETH, which meant that one ether was worth 0.0007479 BTC or about $0.29 at BTC prices in September 2014. This would lead to annualized return for BTC of 459% and an annualized return for ETH of 356%. If looking at annualized return, these two cryptocurrencies take the first two positions easily.

Alternative Markets Update November 2020
Since the presidential election, the market has got quieter, with equities raising again, after they had experienced volatile weeks and mostly declining stock prices. The DJIA reached the 30k mark several times since then but falling below it again multiple times. Figure 1 shows the YTD (as of October) of different asset classes over the last 25 years (the entire table is here). U.S. Large Cap Stocks have gained only 1.5%, which seems low, due to the tech stocks’ raise and the media coverage they have received. Nevertheless, other industries had more difficulties in dealing with the crisis. Gold has performed very well, topping 2020 by far with a YTD of 21.9%. Figure 2 shows the performance of different hedge fund strategies. Arbitrage strategies have done best in 2020 so far with an average return 6.44%, which are low number in comparison to most previous years. Unsurprisingly, the other two most successful strategies are Long / Short Equity and Macro strategies. 

Our most successful global macro strategy, Discretionary Global Macro, has yielded 52.27% in 2020 so far. Event Driven strategies have suffered the most with a loss of 2.62%, which is a solid result, especially when considering Figure 1 and the returns of other asset classes.