With cases of the Omicron Covid-19 variant soaring, the far-reaching effects of the pandemic remain firmly in the spotlight, with a new study jointly published by AIMA and KPMG exploring how hedge fund firms are continuing to adjust to the new business landscape.

The survey of more than 162 hedge fund firms shows around four-fifths of managers are now moving to a permanent hybrid working model in light of the pandemic. But concerns remain over how best to foster team-building, collaboration and decision-making in the new landscape, as more managers look to expand their product offering into new areas and strategies to capitalise on the evolving opportunity set.

Meanwhile, the increasingly frequent spikes in volatility driven by the ongoing uncertainty over coronavirus could offer strong trading themes for hedge funds looking to capitalise on the attendant stock market upheaval.

A market commentary by Man Group this week examined the various emerging trends from the biggest VIX surges over the past 30 years, noting that four of the top 10 spikes have occurred since the start of the pandemic. The note weighed up how investors can capture the equity market rebound following vol surges.

Elsewhere, India-focused hedge fund strategies are set to be the “big performance winners” this year, according to new data published by eVestment.

Despite losing more than 2 per cent in last month’s market reversal, hedge fund managers trading India have advanced more than 40 per cent since the start of 2021, leading the emerging market hedge fund sector, which has also seen Russia-focused strategies rise 11.52 per cent YTD.

New industry analysis of side letters – specific agreements between investors and hedge funds, which investors often use to secure preferential terms on issues such as fees and liquidity – shows fee discounts and most-favoured nation clauses now dominate such agreements.

Seward & Kissel’s sixth annual survey on side letters – conducted between July 1, 2020 to June 30, 2021 – found that fee discounts and MFN clauses now feature in almost half of all side letters within the hedge fund industry. The report also found that the bulk of side letters (79 per cent) continue to be made with more established hedge fund firms, with funds-of-funds investors accounting for 54 per cent of all side letters agreed.

Hugh Leask
Editor, Hedgeweek