US Best Practice 2019
It gives me great pleasure to provide a foreword for this year’s Hedgeweek US Awards report, in which we showcase some of the industry’s award-winning service providers. This year, we took a detailed methodological approach to selecting our fund manager award winners, with help from BarclayHedge, who were very supportive each step of the way. What is unique about our awards programme, however, is that every winner is selected by Hedgeweek’s readership, and is, as such, a peer review. We think this helps give an additional layer of authenticity. And gives each award winner a legitimate right to share their achievement with clients; both current and prospective.
Performance lies at the very heart of this industry, irrespective of whether you are an asset manager or an asset servicer. Last year hedge funds had a strong run through the first 11 months but during the market meltdown in December a lot of those gains were wiped out. Through the first half of 2019, hedge funds generated net returns of 7.2 per cent according to BarclayHedge. Macro strategies in particular did well and were up nearly 10 per cent through August.
If, as Ray Dalio said last year, we are in the 7th innings of the economic cycle, then any market downturn could well play to the strengths of active managers over the coming years, especially fundamental stock pickers. One manager I spoke to recently said she believed this to be a “golden period for shorting stocks”; which is good news for prime brokers!
Also, thanks to the incredible amount of data available as a result of technology innovation, this is helping managers develop more refined research ideas, to seek out new sources of alpha both long and short. Technology providers, as well as fund administrators and equity research desks in banks, are reacting quickly to support hedge funds in this data-rich, interconnected marketplace, as they seek to gain any edge they can on the competition to deliver outperformance to investors.
Performance applies to asset servicers equally as it does to asset managers: be it in terms of execution quality, more automated administration services, managed IT solutions, cybersecurity protection and best practices, legal and regulatory advice; giving managers not just up-to-date insights but explaining how the changing regulatory landscape directly impacts their own particular business.
All of these are key performance metrics, not just market returns. This is an industry where only the strong survive. Maintaining a commitment to excellence requires passion, intelligence, discipline and a will to win. In that sense, the hedge fund industry is analogous to elite sport.
Given that this is a report celebrating the achievements of US service providers, it would be remiss of me to not use the NFL as an example. Recently, Drew Brees, the 40-year old quarterback of the New Orleans Saints and a future hall of famer spoke about his stellar career. When asked how he approaches each game, he gave a great quote: “I’m just trying to prolong my prime.”
It is fair to say that every one of this year’s award winners is doing just that – and on behalf of the Hedgeweek team, I congratulate each and every one of you.
Editor in Chief, Hedgeweek