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Hedge Fund Upswing Looks Set to Continue

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Hedge Fund Upswing Looks Set to Continue For UBS marketing purposes The hedge fund industry has been enjoying a period of strength, after several challenging years. (ddp) Alternative investments Hedge fund upswing looks set to continue 24 August 2021, 10:01 am CEST, written by UBS Editorial Team The hedge fund industry has produced good returns so far this year and attracted renewed inflow from investors. We believe the outlook going forward remains positive, with hedge funds offering an appealing combination of attractive returns, downside mitigation, and diversification. The hedge fund industry has been enjoying a period of strength, after several challenging years. Year-to-date the average hedge fund is up between 5% and 10%, according to HFR indexes. This solid result follows an 11.8% return last year, one of the best outcomes since 2009. Meanwhile, after suffering withdrawals of more than USD 170bn over the past five years, hedge funds gained a net USD 18.4bn in the first half of 2021. Hedge funds look set to continue to provide an appealing combination of attractive returns, downside mitigation, and diversification. 1. Technical market factors remain conducive of hedge fund returns. The transition to a reflationary environment is likely to continue, benefiting certain sectors and asset classes while hindering others. This dispersion typically increases opportunities for fund managers. Meanwhile, structural shifts (including sustainability, digitalization, and deglobalization), corporate deal activity, and investor flows are all creating opportunities hedge funds can take advantage of. Overall, the current backdrop is supportive of hedge fund returns. 2. As an alternative to holding stocks outright, hedge funds can be a defensive way to build market exposure. Hedge funds typically exhibit a lower beta to global markets and include a focus on risk management and downside mitigation. Hedge funds could be a potential option for investors looking to lock in some market gains while maintaining some exposure, or for those looking to cautiously build fresh positions. 3. Hedge funds are an important source of diversification. The bond/equity correlation has been positive recently as markets have focused on the outlook for inflation and monetary policy. As a result, bonds and equities may no longer For UBS marketing purposes diversify one another as well as in the past, making hedge funds more important as an alternative diversifier in a portfolio context. So, we believe that the recent positive trends for the hedge fund sector look set to continue, and we advise investors to maintain adequate exposure. For more on downside protection strategies, click here. Important information As a firm providing wealth management services to clients, UBS Financial Services, Inc is registered with the U.S. Securities and Exchange Commission (SEC) as an investment adviser and a broker- dealer, offering both investment advisory and brokerage services. Advisory services and brokerage services are separate and distinct, differ in material ways and are governed by different laws and separate contracts. It is important that you carefully read the agreements and disclosures UBS provides to you about the products or services offered. For more information, please visit our website at www.ubs.com/workingwithus. © UBS 2021. All rights reserved. UBS Financial Services Inc. is a subsidiary of UBS AG. Member FINRA/SIPC. There are two sources of UBS research. Reports from the first source, UBS CIO Global Wealth Management, are designed for individual investors and are produced by UBS Global Wealth Management (which includes UBS Financial Services Inc. and UBS International Inc.). The second research source is UBS Group Research, whose primary business focus is institutional investors. The two sources operate independently and may therefore have different recommendations. The various research content provided does not take into account the unique investment objectives, financial situation or particular needs of any specific individual investor. If you have any questions, please consult your Financial Advisor. UBS Financial Services Inc. is a subsidiary of UBS AG and an affiliate of UBS International Inc..
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