Can hedge funds smash records again in 2023?

Hedge funds will deliver optimal returns for investors this year and are likely to outperform other assets, forecasts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organisations.

The bullish prediction from Nigel Green of deVere Group follows news that one Miami-based hedge fund made $16 billion last year — the biggest annual windfall in history. The record-breaking performance takes that fund’s gains to almost $66 billion since its launch.

He says: “Whilst equity hedge funds recorded the worst performance in 2022 since 2018, it was a totally different story for global macro hedge funds, which outperformed the industry.

“Their success was largely down to a turbulent environment for global markets triggered by the war in Ukraine, central banks’ rising of interest rates to tame red-hot inflation, soaring commodity prices, and slowing economic growth.”

The deVere CEO continues: “Although market conditions are set to become more favourable in 2023, many of last year’s key conditions will remain a feature. 

“For instance, despite inflation likely to peak in the coming months, central banks, including the U.S. Federal Reserve, are expected to continue implementing rate hikes, albeit at a significantly slower pace. 

“Economic growth is also going to remain sluggish.

“Therefore, the environment will still be highly volatile throughout 2023, creating opportunities for hedge funds to deliver optimal returns for investors. 

“Indeed, with a similar backdrop as 2022, global macro hedge funds are again likely to outperform other assets this year.”

What is a hedge fund? A hedge fund is a limited alliance of investors that are run by professional fund managers using a wide range of strategies, including trading of non-traditional assets, to generate above-average investment returns.  

Given that they are uncorrelated with equity markets, hedge funds have grown in popularity in recent years by investors seeking diversification, which is universally regarded as the best way to mitigate risk and seize opportunities for portfolios.

Nigel Green concludes: “Hedge funds give good fund managers an opportunity to reduce risk and increase returns for investors.

“Using the environment and conditions to their advantage, we expect hedge funds in 2023 to again be able to outperform a host of other asset classes.”

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