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.

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.