Despite significant challenges in the hedge fund industry in 2021, such as the
In its Best's Special Report, titled, 'Favorable Hedge Fund Returns Lead to Book Value Increases for Insurers,' AM Best states that insurers' holdings increased in 2021 in aggregate book-adjusted/carrying value (BACV) and by the actual number of holdings. BACV rose to
'Hedge funds generally have been perceived as an unfavorable asset class given volatile returns and fee structure,' said
Despite favorable returns, the hedge fund industry still had trouble in 2021, according to the report; in particular, the short squeeze initiated by retail investors in
Nonetheless, the insurance industry's hedge fund exposure, which is highly concentrated among a small population of insurers, grew by 6.5% in 2021, with an additional
The first quarter of 2022 marked the largest allocation of new capital in a quarter since 2015, largely driven by the uncertainty surrounding commodity prices, geopolitical tensions and the rising levels of inflation. These factors contributed to global macro-strategies being among the most popular for the quarter. While these economic and geopolitical challenges are generally negative, the uncertainty can bring advantages to the hedge fund market due to their lack of correlation with other typical asset classes. Ultimately, the lingering effects of the pandemic and ongoing market uncertainty will determine if the hedge fund market will continue to see renewed interest and greater exposures.
To access the full copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=320356 .
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