Displaying items by tag: hedge funds
According to the third annual Alternatives Watch (AW) Research Investor Compendium commissioned by Vidrio Financial, there was a strong uptick in the amount of alternative investment mandate activity across some of the largest institutional investors. In 2021, AW's second annual compendium tracked a total of $130 billion in new capital across more than 900 individual institutional investor mandates from 50 of the top alternative allocators. That figure jumped to $144 billion in 2022, an increase of over 10%, across more than 1,000 individual mandates. There was also an increase in investor interest across infrastructure and real asset strategies to $6.9 billion and $4.9 billion, respectively, as those strategies act as inflation hedges. Other key findings include a muted slowdown in private equity assets, while there was a pick-up in activity in hedge funds as large institutional players sought to purchase risk-mitigating assets throughout the year. In addition, total private equity and venture capital mandates accounted for over half the mandates in the compendium and were spread out across the world, as investors embraced life sciences and technology sectors. Mazen Jabban, Chairman and CEO, of Vidrio Financial, stated, "As we saw in this year's Compendium performance data, Vidrio Financial continues to observe alternative asset classes growing in importance for institutional investment teams who work to take advantage of illiquidity premiums in the private markets while also seeking greater transparency into these types of investments."
Finsum:According to the third annual Alternatives Watch Research Investor Compendium, there was a 10% uptick in the amount of alternative investment mandate activity across some of the largest institutional investors.
According to Man Group boss Luke Ellis, investors should get used to volatility in the markets. Last Tuesday, Ellis predicted inflation will remain high because of strong wage growth in much more volatile markets. He stated, “It will take a lot of years before inflation is put to bed again. We’re in a different paradigm.” He added, “The base effects are running out and we still have very significant wage inflation. It’s not squeezing services [sector] wage inflation, and services is such a big part of the economy. You can’t get consistently to [a] 2 percent [inflation target] when you have 6 to 7 percent wage inflation.” Ellis also said that he did not believe stocks had yet bottomed out. He compared the current environment to the 1970s when the real return from equities after inflation was about zero. His comments come as U.S. stocks fell in February with investors growing concerned that the strength of the economy might require higher interest rates, and the Fed’s preferred measure of inflation rose more than expected in January. In addition, both France and Spain also reported a rise in inflation, beating forecasts.
Finsum:Man Group boss Luke Ellis predicts inflation will remain high due to strong wage growth in volatile markets.
Amid volatility that wreaked havoc on the market last year, hedge funds lost almost $125 billion worth of assets from performance losses, according to Hedge Fund Research (HFR) data. Investors also pulled their money from hedge funds last year, leading to a net outflow of $55 billion, the largest capital flight from hedge funds since 2016. This is a sharp reversal from 2021 when hedge funds saw $15 billion in net inflows. Volatility in the markets was triggered by high inflation, interest rate hikes, and Russia's invasion of Ukraine. Investors pulled $40.4 billion out of hedge funds that buy and sell stocks, a strategy that posted the worst performance for the year, losing $112.5 billion. Even macro funds that saw strong performance last year dealt with outflows. Institutional investors pulled $15 billion from these funds, according to HFR. In fact, the only hedge fund strategy that did see an increase in money was event-driven mergers and acquisition and credit funds that saw $4.3 billion in inflows. It was a tough year for performance overall for the hedge fund industry, as the HFRI 500 Fund Weighted Composite Index fell 4.2%. The index tracks many of the largest global hedge funds, marking the worst performance since 2018.
Finsum:The hedge fund industry lost $125 billion last year amid market volatility triggered by high inflation, interest rate hikes, and Russia's invasion of Ukraine.
While many hedge funds performed poorly last year, there was one strategy that had a big year, macro. According to Investopedia, a global macro hedge fund strategy is defined as a strategy that bases its holdings primarily on the overall economic and political views of various countries or their macroeconomic principles. Macro strategies performed well in last year’s volatile market, leading to strong gains for several funds. For instance, AQR Capital Management’s longest-running strategy had its best year since its inception in 1998, with the fund posting a gain of 43.5% net of fees. In fact, at least a dozen AQR funds saw record performance. AQR’s Absolute Return strategy soared 55% before fees, while the Style Premia Alternative Fund jumped 30.6%. AQR’s global macro strategy also had its best year, with a 42% gain. AGR wasn’t alone in having a strong year. Scott Bessent, who is a former Soros Fund Management investing chief, posted a 30% gain in his macro hedge fund and Chris Rokos’s $15.5 billion Macro Fund surged 51% in 2022, his best-ever gain. However, there was one notable firm that didn't perform well, Bridgewater Associates. Ray Dalio’s firm gave up much of its gains after losing money in October and November.
Finsum: Several macro hedge funds performed well last year, with at least twelve AQR funds achieving record performance.
Last year was a terrible year for the markets, even for many hedge funds. According to investment data firm Preqin, hedge fund returns were down 6.5% in 2022, the largest drop since the 13% decline in 2008 during the financial crisis. That’s why global hedge fund managers are preparing for persistent inflation by seeking exposure to commodities and bonds that perform well in inflationary environments. A majority of 10 global asset and hedge fund managers that were surveyed by Reuters said commodities are undervalued and should thrive as global inflation stays elevated this year. In addition, they are also seeking inflation-linked bonds to shield against price rises, and exposure to certain corporate credit, as higher rates restore differentiation in company bond spreads. For instance, London-based hedge fund manager, Crispin Odey is betting inflation will remain high. He told Reuters that "Commodities will start to rise again. They've sold off very heavily and are below operating costs in many instances." Danielle Pizzo, chief strategy officer at Schonfeld Strategic Advisors, told Reuters that her firm “Aims to focus more on investment grade and high-yield bonds this year as well as commodities.”
Finsum:Hedge funds, which saw the largest drop in performance last year since the financial crisis, are concerned about persistent inflation and are seeking exposure to commodities and select bonds.