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Hedge funds set for sunny year after a scorching 2019

9 Jan 2020

Hedge funds enjoyed their best year for a decade in 2019, but their performance may not be as strong in the next 12 months, an industry expert claims.

A combination of international instability and economic and political uncertainty is likely to tone down hedge fund results in 2020, though the outlook remains positive, Kenneth J. Heinz, president of Hedge Fund Research (HFR) said.

“While the core US economy and employment remains strong, the 2020 outlook reflects positive but tempered expectations as a result of rising geopolitical risks and increasing conflict in the Middle East, continuation of trade tariff negotiations and the uncertainty of the US election,” Heinz added.

The HFRI Fund Weighted Composite Index gained 1.8% in December, taking its 2019 performance up 10.4%. This made it the industry’s strongest calendar year since the index surged 20% in 2009 in the aftermath of the financial crash.

There were strong gains across equities last year, led by US technology stocks, as well as in fixed income, commodity and currency markets, Heinz said.

The HFRI Equity Hedge (Total) Index enjoyed its strongest year in 2019 since 2013, climbing 13.9%. Equity hedge (EH) strategies drove hedge fund performance throughout 2019 propelled by US equities, while healthcare and technology dominated EH sub-strategies. “Hedge funds posted the highest annual performance since the financial crisis recovery, as powerful risk-on sentiment dominated not only December, but most of 2019, with risk parity and the highest beta strategies leading industry gains,” Heinz said.

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