Confidence levels among hedge fund managers are at their highest levels in recent years amid strong industry performance and capital inflows, according to a new report from the Alternative Investment Management Association.

Among the 300 hedge funds surveyed, the group’s average measure of confidence in the economic prospects of their businesses rose 6% this quarter, as compared to Q1 2021. More than 90% of funds also reported a positive confidence score for their economic prospects over the next 12 months.

Despite an increase in industry headline risk and the potential for closer scrutiny by regulators, hedge funds are pointing to strong performance results and the level of interest from investors as positive factors influencing their optimism. Multi-strategy funds, for example, posted strong returns last quarter and reported the highest confidence levels among all the strategies surveyed.

During the COVID-19 pandemic, investors began turning toward hedge funds as a way to manage downside risk associated with market volatility and to increase their diversification of assets. In fact, this May, the global industry grew by an estimated USD 41bn, extending gains for the year of roughly USD 67bn, according to the report.

The launch environment remains robust for funds, with multi-strategy and global macro funds attracting the most interest. The report predicted that new launch activity will also increase in Q3 of this year.

Confidence levels varied slightly by region, with North America-based funds continuing to express the highest level of confidence globally, followed by APAC and then EMEA.

The group that AIMA surveyed accounts for approximately USD 1trn in assets under management. The quarterly survey was first conducted in Q4 2020.

Photo by Josh Rose on Unsplash