Hedge-Fund Exposure Signals Caution for Equities

A boost in exposure to U.S. stocks by trend-following hedge funds may be signaling a decline is in the offing. This according to a recent article in Bloomberg. The article cites comments from Sundial Capital Research Inc. founder Jason Goepfert that although equity-focused hedge funds are underweighted in stocks, trend-following funds “have suddenly seen the light, going from 25% short exposure in March to more than 50% long exposure” as of the second week in… Read More

Poker Prowess Offers and Edge in Investing

A new study suggests that hedge fund managers that are good at poker may have an edge when it comes to investment decision-making, according to an article in Bloomberg. “On one hand, there’s skill overlap,” the article argues, adding, “Both activities demand aggressiveness, accurate calculations under pressure, keen behavioral insight and shrewd risk-taking. On the other hand, poker seems like a risk-seeking activity, suggesting reckless and overconfidence managers.” The article outlines the findings of a… Read More

Investors Keep Returning to Hedge Funds

A survey of institutional investors by JPMorgan Chase found that most participants planned to “maintain or increase their overall hedge fund allocations in 2019, following a year during which 68 percent of respondents said their hedge fund portfolios underperformed.” This according to a recent article in Institutional Investor. Over half of the survey’s 227 participants—which included banks, consultants, endowments, foundations, family office, funds of funds, insurers and pensions—said they intend to maintain their hedge fund… Read More

Top Stockpicker Steps Off Hedge Fund Stage

An article in Barron’s reports that Steve Mandel–“the most successful fundamental stock picker of them all”—stepped down as portfolio manager of Lone Pine Capital in January. The article notes that Mandel, who was not well-known outside of the hedge fund industry, generated “tens of billions of dollars in gains for his clients over the past two decades and established one of the best investment track records ever.” The article includes praise from Mandel’s peers, including… Read More

A Hedge Fund Performs by Staying Small

Managers of the Netherlands-based Plethora Precious Metals Fund say that the “key to getting monster-sized returns in mining equities is to be small,” according to an article in Bloomberg. Compared to fund giants like BlackRock and Vanguard, Plethora’s $20 million in assets is small, but the fund isn’t looking to get bigger. The article reports that the fund invests in young mining exploration companies, mostly in gold. Its founder, Peter Vermeulen, said in an interview,… Read More

The Death of the Hedge Fund Industry Has Been Greatly Exaggerated

An article in Bloomberg reports that, despite the closure of some bigger name hedge funds, the overall number of liquidations fell in 2018. What may have seemed like an omen for the industry, the article says, is more of a “Darwinian thinning of the herd” that may suggest an improvement in quality. “As the industry has matured and the regulatory environment has become more vigilant, the cost of setting up shop has risen,” the article reports.… Read More

WorldQuant’s New Fund Underperformed

The first quant fund established for outside investors by the Connecticut-based firm WorldQuant has lagged its benchmark from the outset, according to an article in Bloomberg. The quant stock fund was created as a joint venture between WorldQuant (founded by Igor Tulchinsky) and Millennium Management (founded by Izzy Englander). According to the article, the fund was established to beat the MSCI World Index by 300 to 600 basis points annually but lost 9.5 percent in… Read More

D.E. Shaw’s Humans are Losing Money

A group of traders at the firm D.E. Shaw, one of the most successful quantitative investment funds, has “struggled to make money in 2018,” according to an article in The Wall Street Journal. According to a spokesman for the firm, its long-short equities group has produced annualized returns of 40% (exclusive of client fees) since January 2013, but the article reports that as of mid-October of this year the group’s losses reached about $100 million.… Read More

The Hedge Fund Strategy That Isn’t Working

Although tracking trends in financial markets was once a profitable investment strategy, the approach has fallen on hard times due to crowding. This according to an article in The Wall Street Journal. Trend-following is explained as follows: “If a security is going up—usually measured by a short-term moving average rising about a long-term moving average—then it’s time to buy. If it falls below, it’s time to sell.” During the 1990s and 2000s, the article reports, these… Read More

Volatility Presents Hidden Risk to Hedge Fund Returns

According to recent research from Robeco Asset Management’s David Blitz: “hedge funds have hitched their wagon to stocks with large equity-price swings—a misguided strategy over the long haul.” These findings were reported in a recent Bloomberg article. In an interview, Blitz said, “The fact that hedge funds are positioned like investors in high-volatility stocks, this does not contribute positively to their returns.” Blitz says that moving away from a low-volatility factor represents one of the… Read More