The rise of micro-hedge funds

One prediction I have for the next 5-10 years: expect a rise in micro-hedge funds.

Since the ‘08 crash, we have seen an exponential rise in VC and angel investing. Everyone that works in Silicon Valley seems to be an angel investor of some sort. New micro-VCs seem to be born every other week.

Investment in technology and startups will never stop, but it’s also unreasonable to assume that the growth will continue. The younger generation will look to find alternatives to a saturated environment.

Enter hedge funds.

The hedge fund days of the old seem to be gone. More and more people are shifting attention to VC investing as returns in trading have started to dry up. Annualized returns from hedge funds have been on a steady decline for some time now.

So why am I predicting a rise in hedge funds in the next 5-10 years? Three main reasons:

Market conditions were tough for hedge funds over the longest bull run in history the last 10 years. This is a new market that we have not seen before. Every months seems like a new all time high and/or low. New trends are forming and there are opportunities out there.

One accelerator of that trend will be whether companies decide to go public earlier or not. A prediction in a prediction which I will write about one day in the future: private companies will learn from experiences like COVID-19 and look to go public earlier. We saw a decade of companies staying private longer. Perhaps the 2020’s will be the decade of companies going public earlier. Returns will shift from the private markets to the public markets.

Almost all things in life are cyclical. Running a hedge fund was once the cream of the crop job in investing. That sentiment shifted to running a VC fund. Hedge funds will be back with the increase of trading thanks for apps like Robinhood. Young investors are learning faster and earlier than ever before. The appeal of the market will turn them into hedge fund managers one day.