The Hedge Fund Roller Coaster Ride Got Even Wilder Last Year
The dispersion of hedge fund returns expanded to its widest in more than a decade in 2020.
Hang on.
Photographer: Stan Honda/AFP via Getty Images
It’s time to bury three myths about the hedge fund industry. First, that any investor can tell in advance which manager will produce superior returns. Second, that active management outperforms in volatile markets. And third, that the most popular funds are more loss-proof than their smaller rivals.
In aggregate, hedge funds had a great 2020. Hedge Fund Research estimates assets under management reached a record $3.6 trillion by the end of the year, boosted by surging asset values and net inflows that added $290 billion in the fourth quarter. For the industry’s customers, though, returns depended greatly on which particular manager their money was with — with the range of potential outcomes at its widest in more than a decade.