New research from SIGTech, a quantitative analysis platform, suggests that hedge fund managers are optimistic about their future prospects and view quantitative strategies as a clear area for growth. Based on a sample of 100 leading hedge fund managers globally with in excess of $230 billion AUM, key findings of the survey include:
- 80% of hedge fund managers expect institutional investors to increase their allocation to quant strategies in the next twelve months with 29% expecting this increase to be significant.
- 73% of managers believe the current economic and fiscal environment is attractive for quant strategies
- 86% expect the number of quant hedge funds to increase over the next five years
When asked which quant strategies and asset classes are likely to see the biggest increase in inflows over the next 12 months, respondents predicted FX and equities will see the largest rise, followed by rates, volatility, and commodities strategies.
78% of managers surveyed believe that quantitative strategies should perform better in 2021 than they did in 2020 and 73% believe the current economic and fiscal environment is attractive for quant strategies. Some 68% say they expect quant strategies to outperform this year, and nearly six out of ten (59%) believe many are becoming more attractive because they offer diversification benefits for portfolios.
With asset owners set to increase their allocation to quant strategies, the research found 86% of those surveyed expect the number of quant fund managers to increase over the next five years, with 28% predicting a dramatic rise.
Levels of transparency in the quant market are expected to increase with the continued growth of the hedge fund industry. 75% of hedge fund managers think increased transparency will lead to institutional investors increasing their allocation over the long term.
New and innovative datasets were also found to have supported the growth in systematic strategies: 24% of hedge fund managers questioned have dramatically increased their analysis of social media and chatroom data over the past 12 months. A further 48% said it has increased, and only 12% said they have focused on this set of market data less.
Over the next two years, 30% say they will dramatically increase their use of chat room and social media data to support signal construction and wider investment decisions. A further one in three (35%) believe their usage of this data will rise slightly.
Over the next two years, over 80% of respondents expect an increase in the use of cryptocurrencies in quant strategies and portfolio management, including 36% who foresee a dramatic increase. 45% predict a slight rise.
The survey report concludes that 2021 is proving to be a strong year for hedge funds in terms of performance and the sector is on track for sustained growth. Exposure to new or previously underutilized datasets and methods in social media, crypto, and even more recently, nowcasting, are further fueling innovation in the industry.
The full report can be accessed here