Alternative Markets Update March 2021
Cryptocurrencies surged enormously since the beginning of 2021. Towards end of February, this reversed strongly, and most coins lost between 20% to 35% within a few days. They remained fairly stable afterwards for almost two weeks. On 8th March 2021, Bitcoin (BTC) started surging again and since then, it surpassed its previous high and set a new record high of $61,711. As of the time of writing, BTC is trading at $60k. Figure 5 and 6 show the price developments of BTC and Ethereum (ETH) in 2021 so far. ETH was hit harder than BTC during this drawdown, as it fell by almost 35%. It traded above $2k before crashing and fell to below $1,400. Its recovery was also slower. While BTC has surpassed its previous high again, ETH is still quite far away, it is just surpassed the $1,850 mark again. BTC has managed to surpass the $1tn market cap again, while ETH remains at around $200bn in market cap. Nevertheless, ETH still outperforms BTC by a wide margin in 2021, which is largely due to very strong surge in the first few days of the year. Just before the surge, influential people, such as Winklevoss named ETH the most undervalued cryptocurrency by far at the time. Similar to what was written before for equities, the space is looking at an interesting time ahead. The only thing that can reasonably expected is volatility. There are many indicators for both a bullish and bearish market going forward. For BTC in particular, it has been widely accepted by institutional clients as a viable asset class. Furthermore, its seemingly unstoppable bull run that started since December 2020 has stopped, but it recovered quickly. Another indicator for the wide acceptance of BTC as storage of value is shown in Figure 7. Since its bull run started in last December, investors sold their gold position in ETFs and moved it to BTC trusts. Moreover, the space also benefits from similar promising outlooks with regards to the macroeconomic conditions currently. 

​What are NFTs?
Dorsey’s tweet represents a formative, valuable part of Twitter history, much like how archeological artifacts in museums might represent important, valuable parts of a historic society’s way of life. These items, whether physical or digital, have value. However, physical items, like artifacts and paintings, have established protocols for how they’re exchanged, such as auctions, brokers, and more. Digital items, like computerized art or Internet mementos, lack a comparable infrastructure for trading and selling items. 
That’s where NFTs come in. NFTs, or non-fungible tokens, are a type of cryptographic tool used to tokenize digital items (like art) to be traded on the blockchain. The token is “non-fungible,” which means that it cannot be replaced with an identical asset. Some financial assets, like fiat cash and Bitcoin, are fungible, because 1 dollar or 1 Bitcoin can always be replaced with 1 identical dollar or Bitcoin. Items like art, which have a unique value generated by the creator, are not fungible because there are no identical items that can replace them. When a user buys an NFT for a digital art piece, they can be completely confident that the item they are purchasing was created and signed by the original artist and is not a copy or fraud. Another user might be able to screenshot the piece and try to sell the art, but such a situation would be akin to selling an iPhone photo of the Mona Lisa. In essence, an NFT represents an “ownership” right to some kind of digital property. 
Digital marketplaces for non-fungible assets (like domain name sellers, in-game stores, art, etc.) have existed for a long time, but most digital items lack an efficient means of exchange. Moving assets from one user to another often requires the use of third-party services, an escrow account, slow payment rails, and complex means of transfer. This inherent friction has significantly limited the potential of marketplaces for digital items, since everyday users struggle to exchange their goods. 
NFTs standardize digital items in tokens that can be exchanged on various public blockchains like Ethereum, bring liquidity and cash flow from DeFi into marketplaces for digital items, and provide strong cryptographic guarantees around ownership, censorship, and fraud & plagiarism. This makes it easier than ever for everyday users to participate in marketplaces for digital items and “own” pieces of the Internet, without having the endure the friction and fraud risks of former approaches.

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.

Alternatives Market Update October 2020

The coronavirus has hit the world severely in 2020. Europe, which had the virus under control in summer, has seen a huge surge in daily cases among almost countries. Some countries, such as Ireland, have already reacted with measures that are close to a lockdown which many countries have experienced in March and April 2020. Stock prices, especially in the US, have risen to record levels, due to the money printing of central banks, all above the Fed. However, at the end of Q3 2020, stocks have not continued their bull run after the crash and have started to decline. Especially tech stocks, which were undeniably the winners of the crisis, have experienced a decline. Nevertheless, the drawdowns now are in no comparison of the gains realized throughout the crisis. The developments observed in the stock market also apply partly to the macroeconomic indicators of recovery, as shown in Figure 1. It shows that the economy globally as well as the US are recovering, whereas Europe and Japan are moving flat. ​

Hedge Funds
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Figure 11 and 12 show our internal strategies compared to appropriate benchmarks. Our SMC Credit Strategy Index is up 2.11% as of September 2020. The SMC Equity Strategy Index has recovered quite well over the year and is up 13.90% with the most successful individual strategies being the Long/Short US Equities Disruptive Technologies strategy with a YTD of 48.20% and the Long/Short US Equity Consumer, TMT, Healthcare strategy with a YTD of 50.08%. Our SMC Tactical Trading Strategy Index is up 104.28% as of September, large based on various cryptocurrency-based strategies. These are further elaborated in the cryptocurrency section. Regarding individual strategies, the Discretionary Global Macro strategy did very well in 2020 with a YTD of 60.75%. The AuM of the hedge fund industry is at $3.22tn as of August 2020, according to Figure 13. The industry recovered quite well, as the AuM dropped way below $3tn during the year 2020, and it is now almost back at the level of $3.29tn, where it was at the end of 2019. The most common strategy (by AuM) is long/short equity, which accounts for 34% of the industry’s AuM. The next most common strategies are multi-strategy and CTA/managed futures but these strategies already account for a substantially lower percentage of the industry’s AuM. A further breakdown of strategy volume by AuM is shown in Figure 14.

Alternative Markets Update October 2020
The Covid-19 crisis does not seem to stop, as many countries are facing a severe increase in cases, as the northern flu season is about to start. In Europe, where the spreading of Covid-19 has decreased during summer, has seen a huge resurgence of cases among most countries, some of them even topping the spreading back in March (such as Austria). In the US, where the situation with Covid-19 did not really improve during summer, the President was infected and hospitalized for two days, is now back in the office. The tension is increasing, as the election is less than a month away and due to the chaotic presidential debate. Figure 1 shows the US unemployment rate over a seventy-year period. Due to Covid, it spiked to an all-time high (not considering WWI and WWII). Nevertheless, the unemployment rate already halved again as of the last report in early October and is now 7.9%. In times of crises, real assets such as gold tend to do very well. Through this crisis we have seen the first time how cryptocurrencies do during such times, and they delivered what was expected. 

Bitcoin (BTC) and Ethereum (ETH) are up 46% and 159% for the year. This boost in the main cryptocurrencies also affected the value of DeFi (decentralized finance). Figure 2 shows the value locked in DeFi, which has surpassed the $11bn mark compared to around $1bn at the beginning of 2020. Our crypto strategies have worked well in 2020 with YTDs between 62% up to 323% (see table above). ​​