Almost universal agreement can be reached on one issue: 2020 was not business as usual. The year started smoothly in the realm of financial markets and economic indicators. Many asset classes and indices grew from the year’s start through mid-February, but in early March the grasp and reality of the COVID-19 pandemic overwhelmed most major cities. Many markets screeched to a halt, ending the longest bull market in modern history, while unemployment surged.
In short order, the world swung to the extreme, from record-low unemployment to record highs, and from fast-growing GDPs to many that came to an abrupt stop. All of this disrupted the financial markets and global economies and strained and challenged operating models. It quickly became a year that tested — and rewarded — resiliency, and the alternatives market persevered to overcome obstacles and seize opportunities.
While the market volatility and global uncertainty have clouded the outlook for many, alternative fund performance has shined, with PE leading the pack in meeting or exceeding performance expectations of their managers at a 4:1 clip. While disruption rattled every corner and market of the globe, investors generally felt that their managers outperformed their performance expectations during the pandemic.
On average, almost all strategies significantly exceeded major benchmarks; they were resilient and demonstrated their value in preserving capital in the downturn while capturing opportunities by bounding forward to capitalize on market dislocations.
Not business as usual took hold and remained. There were unprecedented levels of market volatility, increased trading volumes and a relatively new and forced concept of “work-from-home.” Concerns centered on in-person discussions, maintaining/cultivating relationships and interviewing/acquiring new talent. Managers were proactive while still delivering on client services.
By leaning in and accelerating adaptations in technology, automation and outsourcing, alternative managers were able to capture consistency in business operations and reporting and move forward with digitalization. While the reach of digital has expanded via the pandemic, even more is needed and wanted by managers and investors, especially with investor relations and marketing.
Read on to learn more from our 14th annual EY Global Alternative Fund Survey, which offers a holistic view of hedge fund and private equity managers, as well as institutional investors who allocate to both asset classes as well as broadly across alternatives.