Industry poll: Investors split over hedge fund performance during sell-off

Liquidity

Investors are divided over how their hedge fund allocations have performed during the recent market crash, a new industry survey has found.

Investment consultancy bfinance polled 260 investors – including pension funds, insurers, foundations and endowments and family offices – in 28 countries, with assets totalling more than USD2.5 trillion.

The snap poll – which quizzed investors on a range of asset classes including hedge funds, fixed income, multi-strategy and alternative risk premia - aimed to gauge investor satisfaction with strategy performance during this month’s stock market collapse following the Covid-19 outbreak.

Of the 52 per cent of survey participants who invest in hedge funds, about half said they were either “somewhat satisfied” or “very satisfied”. On the flipside, though, roughly 40 per cent of hedge fund investors are “not satisfied” with strategy performance.

bfinance’s study, conducted on 19-20 March, found global macro and CTA strategies have managed to avoid losses - but stressed that intra-strategy dispersion is significant. Hedge fund strategies operating in more liquid markets have been less affected by the liquidity squeeze, with this reflected in strategy performance.

Overall, 55 per cent of investors had equity hedges in their portfolio, and three quarters of those are either “very satisfied” or “somewhat satisfied” with the performance of those hedges. 

“Equity downside protection (hedging) could, depending on implementation, have been the golden ticket for Q1 2020,” the survey noted.

A third of participants – 33 per cent – have made some minor or dynamic tactical portfolio adjustments, while a further 11 per cent have gone further, making “significant” dynamic/tactical changes to their allocations. About a fifth – 21 per cent – have made no significant changes, and are just rebalancing to the prior weights, while more than a quarter (27 per cent) have made no significant changes, noting that “rebalancing is challenging.”

One survey participant said: “We remain overweight in sovereign fixed income, and raised cash for expected increase in capital calls and liquidity and FX hedging. Have very modestly added to equities and hedge funds.”

Looking ahead, there is little consensus on outlook, with the number of those expecting a swift economic recovery evenly matched with those fearing a protracted slump. 

The findings follow recent reports that a raft of well-known hedge funds have made hay amid the recent market maelstrom.

Crispin Odey’s Odey Asset Management is up a reported 20 per cent year-to-date on the back of a number of successful short positions, while Kenneth Griffin’s Citadel has added 4.5 per cent during the crash, according to media reports.