Demonstrating excellence

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A very warm welcome to our 2020 US Hedgeweek awards report. I’d like to extend my congratulations to all of the award winners this year. It’s a clear recognition of the outstanding work the managers contained herein, have done over the last 12 months, in an industry where saying one is ‘best-in-class’ cannot be underestimated. 

In this report we ask managers to go under the hood to showcase their respective investment strategies, and reveal a few insights into how they think about risk/return in the current environment. Each article is designed to show readers, in brief, what makes these managers tick, providing a snapshot of how they’ve been able to achieve award-winning success in 2020. 

In many respects it has been a remarkable year for hedge funds, with volatility coming back with great gusto. The extreme sell-off in March and April was met with impunity as markets snapped back to such an extent that November saw the Dow Jones Industrial Average top 30,000 for the first time in its history. 

Unsurprisingly, overall performance for the asset class has held up well. Year to date, hedge funds have returned on average 5.39 per cent according to Preqin, with equity and event-driven funds leading the performance charts in Q3. Right now, I’m sure everyone is getting their portfolios tactically positioned to trade on the inevitable post US-election volatility, and no doubt the global macro players will be watching like hawks the denouement between the UK and Europe as the Brexit deal deadline enters its final month. 

One broader observation I’d like to make, based on managers and service providers I’ve spoken to this year, is just how well they’ve coped with the pandemic. Wall street has continued to function smoothly. Trade execution has worked fine. And if ever there was a time for managers to stress test their BCP plans, 2020 has been ‘the’ time to demonstrate their resilience to investors.

Of course the big question everyone now faces is: what happens next? Will managers semi-permanently base themselves outside New York? Will some follow the likes of Paul Singer and relocate their headquarters to Florida, or other parts of the US? Only time will tell but it does feel as though something fundamental has changed in peoples’ approach to working in the ‘city’.

This year’s awards were conducted in partnership with Bloomberg, using fund manager data to pre-select the shortlists of nominees on which Hedgeweek’s readers voted. Many thanks to Bloomberg for their help in providing a superb data set of manager performance. I am in no doubt that the managers profiled this year really do represent the best of their peer group. 

Looking ahead for 2021, one is likely to see markets continue to remain volatile. Against a rising inflationary backdrop, institutional investors cannot continue to rely on rising equity markets, nor can they come close to achieving their desired yield objectives in the bond markets. This should play to the strengths of active managers who can demonstrate a resilient, repeatable investment process for generating truly differentiated returns. 

Investors need hedge funds more than ever. Now is the time for managers to prove their worth and, like this year’s winners, make investors want to keep coming back for more. The last decade was muted. I think the decade ahead will be a far spicier affair; perhaps more mulled wine than eggnog. Cheers to that and I wish everyone festive good tidings and much stocking-filled success for 2021. 

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James Williams
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