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Multi-strategy hedge fund Brummer dips into negative territory, as poor short alpha drives January equity losses

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Stockholm-based hedge fund manager Brummer & Partners saw its flagship multi-strategy fund dip slightly into negative territory last month.

The Brummer Multi-Strategy (BMS) vehicle slipped 0.8 per cent in its SEK class, and 0.9 per cent in the USD class, in January, while the twice-levered Brummer Multi-Strategy 2xL version of the fund lost 1.7 per cent in both SEK and USD tranches.

Brummer said on Wednesday that equities and bond yields ticked upwards in early January, buoyed by the prospect of further stimulus from the new Biden administration – but appetite soon soured in the second half of the month as stimulus hopes faded, and governments wrestled with vaccine supplies and renewed Covid-19 restrictions.

Heavily shorted stocks rallied towards the end of the month, driven by retail traders on the Reddit discussion forum, while higher oil prices led in commodities, and sterling gained against the euro.  

The slides come after the multi-strategy hedge fund manager – which this year celebrates its 25th anniversary – saw its flagship BMS vehicle gain 12.6 per cent in 2020, its second-best annual performance since launch.

Long/short equity strategy Black-and-White took the biggest hit last month, losing 5.3 per cent as it struggled with poor short alpha.

Machine-learning strategy Lynx Constellation registered a 2.5 per cent loss, while Florin Court – a systematic trend-following fund within the BMS vehicle – fell 1.2 per cent in January, as positions in fixed income, credit, and currencies came unstuck.

Meanwhile, equity long/short strategy Manticore and trend-following fund Lynx each lost 0.3 per cent.

On the upside, systematic equity fund AlphaCrest and Frost – a fixed income relative value strategy –partly stemmed January’s losses.

AlphaCrest rose 2.7 per cent, navigating market volatility and generating what Brummer described as “solid market neutral alpha”. Frost generated a 3.3 per cent return, with fixed income curve positioning and FX bets underpinning strong gains across most of its thematic exposures, Brummer said in a commentary on Wednesday.

Macro-focused manager Arete advanced 1.4 per cent, driven chiefly by equity trades, as long/short credit strategy Observatory added 0.7 per cent, with profits stemming from positive relative value bets.  

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