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Fund Managers Anticipate Trump Bump

Chaos and uncertainty in the wake of Trump's election could be a boon for hedge funds.

While much of the Northeast considers fleeing to Canada in the wake of the recent election, alternative asset fund managers are slightly bullish on the prospective impact that the Trump presidency could have on their industry.

According to a recent survey of nearly 200 private capital fund and hedge fund managers by Preqin, over half of respondents, 53 percent, think that the election result will be a net positive for alternative assets in this country. Only 12 percent think it will be a negative. As for the industry’s prospects overseas, however, the outlook isn’t quite so rosy, as 25 percent think President Trump will negatively affect the industry outside of America, while only 22 percent think he will be a positive force.

 

This bifurcation between U.S. and foreign asset performance is a running theme in the data. For instance, 30 percent of private capital managers expect their U.S.-based assets to benefit in the next 12 months, while only 11 percent predict the same for their foreign investments.

Policy-wise, the surveyed managers are most excited about a potential reduction in corporate tax, with 73 percent of respondents deeming a positive change. Proposed infrastructure spending was the second most anticipated change, at 62 percent. On the flip side of the coin, most respondents are concerned about the impact of withdrawing from international trade deals, expressing that scuttling either NAFTA (59 percent) or the Trans-Pacific Partnership (54 percent) would negatively affect the alternative asset industry. Fifty-five percent expressed worry about any changes to carried interest as well.

 

Overall, hedge fund managers seem the most consistently excited about a Trump presidency, which Preqin attributes to the liquidity of most hedge funds’ underlying investments.

One manager interviewed explained that: “Greater uncertainty, volatility and negativity should help the industry, as it should outperform long-only strategies in such conditions.”

Fifty-three percent of hedge fund managers surveyed anticipate a boost in performance for the remainder of 2016, 46 percent believe that boost will continue through the next 12 months and 35 percent believe their performance will benefit in the even longer term. By comparison, for those same time frames, only 9 percent, 9 percent and 11 percent, respectively, of hedge fund managers anticipate a negative impact on fund performance.

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