MFA Blog

MFA President and CEO Richard H. Baker Provides Commentary in Preqin’s 2018 Global Hedge Fund Report

Posted on January 31, 2018

Preqin today released its 2018 Global Hedge Fund Report, which provides fresh insight into the industry. According to the study, 72 percent of investors reported that their portfolios met or exceeded expectations in 2017. The strong performance prompted investors to allocate additional capital to the industry. In fact, Preqin reports that in 2017 hedge funds received net inflows of $49 billion in new capital, pushing the industry’s assets under management to a record high of $3.55 trillion.

MFA President and CEO Richard H. Baker said: “2017 showed how funds continue to adapt to changing conditions, identify new opportunities and find innovative new markets to explore. 2018 holds even more potential. MFA Members continue to seek value for their investors in a variety of ways, such as deploying new quantitative strategies or taking advantage of the latest developments in machine learning.” See below to read Mr. Baker’s full commentary.

Why Alternative Investments?
Richard H. Baker, President and CEO, Managed Funds Association

2017 was another consequential year for the alternative investment industry.

According to independent estimates, industry assets under management reached record levels in 2017. We have every reason to believe that 2018 will be even better.

Large institutional investors like pension funds, charitable endowments and universities turned to alternative strategies again in 2017, continuing the trend from previous years. That trend shows no signs of changing.

Preqin’s data bears this out. Two-thirds of investors surveyed in December 2017 plan to maintain or increase their allocations to hedge funds in 2018. Looking further into the future, three-quarters of investors also expect to maintain or increase those allocations over the next decade.

This represents real and growing confidence in our industry – confidence we believe is well deserved given a range of factors.

Many market participants believe rising interest rates and other macroeconomic factors will offer increasing opportunities for alpha in the coming years.

In addition to helping investors deliver reliable returns over time, our Members help institutions and others manage risk in their portfolios. Given the stakes involved, pension funds, colleges and charitable endowments understand better than most the need to limit their potential exposure in the event of a downturn or market adjustment.

As one institutional investor told us recently: “We do not want to be entirely dependent upon the outcome of the stock market, so we need some diversifying strategies.”

2017 was also not without its challenges. Among other issues, our industry continues to grapple with regulatory and political uncertainty in the U.S. and abroad. In addition, the industry’s contributions to the economy and its value to investors continue to be misunderstood by many. Improving the industry’s perception among key stakeholders is a top priority for MFA.

Despite those headwinds, 2017 showed how funds continue to adapt to changing conditions, identify new opportunities and find innovative new markets to explore. 2018 holds even more potential. MFA Members continue to seek value for their investors in a variety of ways, such as deploying new quantitative strategies or taking advantage of the latest developments in machine learning. And the rise of cryptocurrencies is a source of constant discussion among our Members and investors as they determine what role, if any, they should play in their portfolios.

As the authoritative voice of the global investment industry, MFA was at the forefront of many of the critical conversations impacting our industry in 2017. MFA Members and staff continue to advocate for fair, efficient and transparent capital markets. We work tirelessly on the issues that matter to our Members and their investors, including the protection of confidential proprietary information provided to regulators.

I am proud to work on behalf of an industry that seeks out and rewards entrepreneurship and innovation. I am proud to work on behalf of an industry that helps protect the retirement security of teachers, firefighters, police officers and others that serve our communities. And I am proud to work on behalf of an industry that plays a critical role in stimulating growth that benefits our entire economy.