Hedge Funds

Hedge fund managers bullish about a Trump presidency...so far

Donald Trump
Carlo Allegri | Reuters

Most hedge fund managers are feeling pretty good about a Donald Trump presidency, even though they have some significant reservations.

At least as far as U.S. funds go, 53 percent of managers believe the new administration will be positive for alternative assets like hedge funds and private capital, according to a survey released Thursday by industry tracker Preqin.

That same level thought the billionaire businessman's election will lead to gains through the end of the year, while 46 percent said returns will benefit over the next 12 months and 35 percent expect good things even beyond that time frame.

Just 12 percent think Trump will have negative effects on the nearly $3 trillion industry.

The Barack Obama years were not great ones for most hedge funds, with overall performance lagging basic market indexes even as capital continued to accrue. Assets under management stand at $2.97 trillion, a 123 percent gain since January 2009, according to HFR.

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However, Wall Street bet heavily that Trump would lose to Hillary Clinton in the presidential race. The Democrat received $78.1 million from the securities and investment industry, while Trump pulled in just $737,235 as of the most recent filing date, according to the Center for Responsive Politics. Those numbers likely will swell considerably for both candidates once the final numbers come in.

On the plus side of a Trump presidency, alternative asset fund managers — a category that also includes private capital — see his plans to reduce corporate taxes as most beneficial to their operations, with 73 percent believing it will be positive. Infrastructure spending is next on the positive side at 63 percent, while 57 percent believe the likelihood for repatriation of at least some of the $2.5 trillion in corporate cash sitting overseas will benefit the industry.

On the downside, they worry that restrictive trade policies could hurt and they also believe non-U.S. funds could suffer as well.

"Managers cited uncertainty over the effects of Trump's policy proposals as a key consideration," Preqin said in a report accompanying the survey.

Alt-asset executives think they'll be able to continue to raise funds from investors during the Trump years "due to hedge funds' ability to capture returns in varying market conditions and the closed-end model's inherent illiquidity," Preqin said.

Hedge funds have seen high levels of redemptions in recent months, but positive returns have helped keep the total assets under management rising. The HFRI Fund Weighted Composite Index was up 3.59 percent through October, lagging the 5.85 percent total return for the through the same period.