How French trend-following hedge fund Metori Capital scored success with revamped CTA model

The aim of London-based systematic managed futures hedge fund manager DG Partners is simple, says founder and chief investment officer David Gorton: “To be the best trend-follower we can be in the business.”

Investment managers “have to be able to cope” with prevailing market environments, and not blame central bank policies for fund performance, according to Man Group CEO Luke Ellis, who says investors also now want more from their portfolios than passive index strategies can deliver.

With less than three weeks left until the US presidential election, London-based hedge funds are now closely scrutinising how certain assets and markets will be shaped by the potential outcome of the 3 November poll.

Merger arbitrage and event driven hedge fund strategies can capitalise on the recent pick-up in M&A activity globally, and help cushion investors’ portfolios amid potential risk aversion as a result of the US election, Brexit and a fresh Covid-19 surge in Q4, industry strategists say.

Technological advances are shaping the way asset management firms operate, as they look for ways to introduce artificial intelligence applications to monetise data, and improve automation from the front to the back office.

A victory for Democratic candidate Joe Biden in the approaching US presidential election would see a “limited short-term negative reaction”, and could herald more fiscal stimulus coupled with a dovish monetary policy, according to Algebris Investments’ head of macro strategies Alberto Gallo.

The rally in emerging markets has “eroded the potential for alpha generation” in EM debt markets, but this weaker investment environment is only temporary, with hedge fund managers keeping their powder dry to capitalise on opportunities at a later stage.

“Our motto is: ‘no beliefs, only processes’,” says Julien Messias, portfolio manager and co-founder of French systematic hedge fund Quantology Capital Management. “We are agnostic as to where the market will go – it is impossible to forecast. So what we trust are our processes.”

Pierre-Henri Flamand, Man GLG’s CIO emeritus and hedge fund industry veteran, says the huge economic stimulus from governments to combat the coronavirus crisis is fuelling the threat of inflation, and is warning investors to “be vigilant rather than to relax”.

With the ripple effect of Covid-19 still being felt in the global economy, investment opportunities in high yield credit, and in particular distressed credit, have been numerous as investors seek out higher yield, at a commensurate higher risk.