Category: Direct Lending

Alternative Markets Outlook 2020

13/2/2020

Hedge Funds
The hedge fund industry realized its highest gains of the decade, with an average return of more than 9%. Figure 1 shows the distribution of our hedge fund strategies, of which more than half of the strategies exceed a return of 10%. As the strategies performed differently across strategies in Q4 2019, it is interesting to have a look at Figure 2, in which is shown, how the different strategies performed compared to their benchmarks. The redemption trend continues but the amount redeemed continuously declined. However, investments in the industry also declines. Overall more redemptions than investments were offset by an organic growth of around 9%, resulting more or less at the same AUM as at the end of 2018. For 2020, we assume, that these trends continue. Investors may expect lower returns than previously, as the industry was unable to meet expectations in most years of the decade. Now, as equity markets are at record highs, it is unlikely that it continues raising at similar pace. As a consequence, we assume that there is a shift in strategies within the industry. This is further supported by the increased interest of Investors in ESG, which is rarely incorporated in the industry. Pensions funds are likely being more interest in hedge funds, as interest rates remain at a very low level.

Along with the shift in strategies, the pressure on the industry is tense, as the standard 2-20 fees are lowered more and more. We do see a tendency in the market with the highest quality managers with constant outperformance to be able to charge higher fees than 2-20 and attracting most of the capital inflows into the industry. Furthermore, there are so many funds, whereas only few manage the main stake of the AUM of the industry, implicating a consolidation trend And focus on developed manager outperform the benchmarks. With the good results in private markets, it is likely that cash is moved towards the private equity and debt industry, as the profit expectations of the hedge fund industry is likely to decline.

Figure 1: Distribution of Performance of Stone Mountain Capital (SMC) Hedge Fund Strategies in 4Q2019, Source: Stone Mountain Capital Research

Figure 2: 2019 Hedge Fund Performance of Stone Mountain Capital (SMC) Strategies compared with Benchmarks, Source: Stone Mountain Capital Research

Alternative Markets Update H2 2019

21/1/2020

Hedge Funds
The industry had its best year since 2013 and the average hedge fund is up more than 9%. Especially the results, which were achieved in H1, are extraordinary. H2 was more volatile, in which equity strategies did very well, while e.g. macro and cryptocurrency strategies lost compared to their results of H1 2019. When considering the economic and political environment, these results are even better, as 2019 faced many uncertainties. Noteworthy are the debate about Brexit all year, the trade war between the US and China, the attack on an oil facility in Saudi Arabia as well as the recent assassination of Iranian general Soleimani, which may have further consequences. Nevertheless, our cryptocurrency strategy remains the

most profitable strategy this year with a YTD of 82%, followed by several equity strategies and our global macro strategy. Figure 1 shows the performance of our strategies compared to several benchmarks, whereas Figure 2 shows the returns sorted by hedge fund strategy.

Figure 1: Overview of Performance of Different Hedge Fund Strategies: December 2019, Source: Stone Mountain Capital Research

Figure 2: Overview of Performance of Different Hedge Fund Strategies: January 2020, Source: Eurekahedge

Alternative Markets Update And Macro Outlook August 2019

28/8/2019

Alternative Markets Update August 2019

The hedge fund industry experienced a decline since its performance of H1 2019. However, the performance remains positive with both of our cross-asset indices achieving a gain of 0.41% in July. The decline of interest rates worldwide helps to increase the attractivity of hedge funds in a currently highly unstable economic environment. Our best performing strategies have not changed, since the last month. Bitcoin Altcoin Actively Managed is still the best performing strategy in 2019 with a YTD of 167.90%, despite the loss of 20.40% in July 2019. The Discretionary Global Macro strategy achieved a YTD of 39.24%, followed by three US equity strategies, incl.

Long/Short US Equities Disruptive Technologies, Long-only US Equities High Conviction and Equities US Activist Event Driven.

Alternative Markets Outlook H2 2019 and Macro Outlook August 2019

13/8/2019

Alternative Markets Outlook H2 2019

The asset management industry experienced significant declines in 2018. Alternative assets achieved the best performance among non traditional long asset classes. The popularity of actively managed assets is decreasing for the last 15 years, while passive solutions and alternatives are gaining more attention, which is likely to continue. It is expected that the industry will experience more volatile markets, increased competition and more economic uncertainty. Especially the uncertainties will increase, for example how the US-Chinese trade war will develop, with the background of new elections in the US in 2020. Europe's uncertainty will peak on how Brexit is executed at the end of October.

Hedge Funds

Hedge funds remain strong in July after a very profitable H1 2019 and reached a new record level of market capitalization of $3.273tn. In July, hedge funds yielded positive results again. The aggregated average performance of hedge in the current year is at 7.67%, which is likely to continue. Figure 1 shows the performance of several hedge fund strategies. Noteworthy is that none of them generated negative return. The interest rate cut of the FED is likely to increase the attractiveness of hedge funds further.

Investors are currently moving cash from equity strategies to lower beta strategies, as equity markets have reached all-time highs. For H1 2019, targeted strategies were mostly credit multi-strategy and relative value arbitrage strategies. However, this shifted to macro, CTA, currency and commodity funds in July 2019 and is likely to continue during H2 2019. Despite the trade war between the US and China, the allocated capital from hedge funds in China increased further. This conflict is likely to shape the general performance of financial markets, especially in the hedge fund industry. Due to current and expected interest rate decisions from most central banks as well as the volatility of currencies, hedge funds are looking for safe havens. Gold is experiencing an increased demand, causing the price per ounce to rise to the highest level since 2016 and $1600 or even $2000 is forecasted from major US investment banks.

Figure 1: Performance of Different Hedge Fund Strategies from June 2018 to June 2019: August 2019, Source: FundMap

Alternative Markets Update H1 2019

30/7/2019

Alternative Markets Update H1 2019

Hedge Funds
After the difficulties for hedge funds in 2018, 2019 started strong, despite the current uncertainties, such as the Brexit, the European elections and the trade war. Only in May, there were some difficulties. This short downturn was offset and more than compensated in June, which yielded extraordinary results. Our best performing strategy was the cryptocurrency strategy, followed by US equity disruptive technology and US equity high conviction. The best performing asset class was tactical trading, which achieved a 30.78% YTD, as shown in figure 1. Furthermore, all strategies had positive return in H1 2019.

Figure 1: Overview of Performance of Different Hedge Fund Strategies: June 2019, Source: Stone Mountain Capital Research

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Alternative Markets Outlook 2020

Alternative Markets Update H2 2019

Alternative Markets Update And Macro Outlook August 2019

Alternative Markets Outlook H2 2019 and Macro Outlook August 2019

Alternative Markets Update H1 2019

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