Hedge funds are entering the remainder of an eventful 2021 on high, with new Hedge Fund Research data showing the industry generated its strongest first half performance since 1999, up more than 10 per cent.
Overall, June was another moderately positive month, though HFR is warning of a “dynamic performance environment” up ahead, pointing to potential virus mutations, energy market volatility, and inflation and interest rate trends in flux, making for a potent market mix between now and year-end.
Against this backdrop of shifting investment uncertainty, a new Barclays study published this week concluded hedge funds can offer investors “a compelling alternative” to fixed income investments. The report – which probed more than 2,000 hedge funds, gauging how they performed in an assortment of market environments – suggests this industry, which has rebounded in style over the past few years, may once again prove vital broader investment portfolios.
That said, this week also flagged up the perils and pitfalls that continue to confront managers of various shapes and sizes.
Sainsbury’s – a key target of many short sellers – saw its share price soar on the back of strong Q1 sales and a strengthened profit outlook, which dented hedge fund managers betting against the FTSE 100-listed firm.
Elsewhere, the long-running Brummer Multi-Strategy vehicle ended the first half flat, as several of its underlying names stumbled in June, reversing gains made earlier in the year. Faulty FX and commodity positions handed losses to its trend-following funds, while the Federal Reserve’s recent hawkish tone on inflation led to investor rotation within stocks, hitting BMS’s equity managers.
In this week’s feature interview, Arnaud Sarfati, CEO and co-founder of Paris-based quantitative asset manager LFIS Capital, discusses the assortment of challenges now confronting systematic managers implementing ESG indicators and sustainability metrics in their funds. The wide-ranging Q&A explores how LFIS is grappling with portfolio constraints arising from ESG factors, the changing regulatory backdrop, auditing concerns, and “data exhaustivity”.
Hugh Leask
Editor, Hedgeweek