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Agecroft Partners Predicts 2021 Will Be One Of The Best Capital Raising Environments For Hedge Funds In Years

Capital raising firm Agecroft Partners is out with their annual list of ten predictions for the upcoming year for the hedge fund industry and if they're right, hedge fund managers should be rejoicing as the firm believes that 2021 will be "one of the best capital raising environments that the hedge fund industry has seen in the past decade."

Agecroft's belief is founded on three factors: strong positive net asset flows, pent-up demand for manager search activity and reallocations stemming from higher manager turnover.

"Most search activity was put on hold due to Covid-19, which led to the closing of almost all multi-person offices around the globe. The first priority for investors was to address fund “blow-ups” within their portfolios.  At the same time, the uncertainty triggered by the late March sell-off put most investors in a holding pattern until the markets were confident that central bank intervention would successfully calm the capital markets. Additionally, most of Q2 and Q3 were consumed by people adjusting to a remote/home work environment and establishing internal and external communication protocols. Travel restrictions effectively cancelled all in-person meetings and further slowed the research process until virtual communication was broadly adopted later in the year," says Agecroft's note. "Market volatility led to the largest dispersion of performance in over a decade across managers within similar strategies. This has historically led to higher manager turnover both within and across strategies, and we expect that to happen again in 2021."

Other trends Agecroft identifies in its note include the resurrection of long/short equity strategies; the line between hedge funds and private equity continuing to blur; a greater focus on ESG and diversity; 1 & 15 becoming the new fee schedule for large institutional investors; healthcare Institutions continuing to drive growth within the alternative investment industry and increased regulatory scrutiny of the hedge fund industry. Agecroft also sees In-person meetings resuming in Q4 of 2021, resulting in increased asset flows to mid-sized firms, although it says that virtual Meetings and virtual cap-intro events are here to stay.


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