Category: Private Equity

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 2019 - Cryptocurrency & blockchain 2020 outlook

13/1/2020

The hedge fund industry performed strongly in 2019, as the industry achieved a steady gain of 9%, whereas several single managers beat the market and gained double digits. Despite those positive numbers, hedge funds still underperformed the equity market and the trend of the past years continues. In order to compete, hedge fund reduced their fees. In each of the last five years, more hedge funds have been shut down than launched. In total, more than 4,000 hedge funds have been liquidated in this period. 2019 was a good year, as all of our strategies yielded positive returns. Particularly strong this year were the equity strategies, especially in H1 2019 and towards the end of 2019. Furthermore, the tactical trading strategies performed even better until summer 2019, but faced losses at the end of 2019. Regarding the macroeconomic environment, the assassination of Iranian general Soleimani by the US and the counterattack of Iran on a US military base causes high uncertainty. The passenger plane, which got hit by a missile in Iran, further

increases tensions, even though the launch of the missile was likely unintentional. As a reaction of this newly escalated situation, safe haven assets, such as gold, which is now at a seven-year high, see increased demand. Similar developments were observed for Bitcoin. A cryptocurrency 2020 outlook is provided by BeQuant and a blockchain 2019 review and 2020 outlook is provided by Pantera Capital below.

Alternative Markets Update Q3 2019

24/10/2019

After strong gains during H1 2019, hedge funds remained more or less at the same level in Q3 2019. In July and August, the performance of our strategies rose about by 0.40% each, while declining in September by approximately 1.20%. When comparing the YTD of Q3, shown in Figure 1, with the results from Q2, our credit strategies gained about 1.5% and is currently at 3.61%. The equity strategies dropped by around 2.6% to a YTD of 10.14%. Tactical trading strategies suffered the most with a loss of more than 10%. However, these strategies were still the most profitable as of Q3 2019 with a YTD of 23.24%. Lastly, the fund of hedge fund strategies fell about 0.6%, currently at a YTD of 6.16%. When looking at the strategies individually, Bitcoin Altcoin Actively Managed remains at the top with a YTD of 128%, despite losses in the last three consecutive months. The Discretionary Global Macro strategy performed exceptionally well in July and August, resulting in a YTD of 58.62%.

The equity strategies suffered in the last month, however, the Long-only US Equities High Conviction and Long/Short US Equities Disruptive Technologies still have a YTD of 20.72%, 18% respectively. Our volatility strategy achieved a YTD of 15.93% and never dipped below -0.5% on monthly performance level.

Overview of Performance of Different Hedge Fund Strategies: September 2019, Source: Stone Mountain Capital Research

2019 Q3 Hedge Fund Performance of our Strategies compared with Benchmarks, Source: Stone Mountain Capital Research

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.

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Alternative Markets Outlook 2020

Alternative Markets Update H2 2019

Alternative Markets Update 2019 - Cryptocurrency & blockchain 2020 outlook

Alternative Markets Update Q3 2019

Alternative Markets Update And Macro Outlook August 2019

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