Though some short sellers were still counting the cost of the recent coordinated GameStop trading surge by amateur traders from Reddit’s Wallstreetbets forum – the subsequent steep losses inevitably roared on by some sections of the popular press – this week brought a degree of optimism and some much-needed cheer to the beleaguered hedge fund industry, amid signs that the coast is now clear for managers to step back into the fray following the recent chaos.
Man FRM – the long-running fund-of-funds unit of London-headquartered, publicly-traded global investment management giant Man Group – indicated that an “unusually large” spread of hedge fund strategies stand to gain from the various trading opportunities arising from the prevailing investment landscape.
Its wide-ranging Q1 strategy outlook explored how a nascent economic recovery, coupled with the Covid vaccine rollout and continued central bank support, is set to boost a range of credit, equity long/short, macro and relative value funds during the first quarter.
The past few days’ headlines may have made for uncomfortable reading for certain sections of the hedge fund sector. But given that 2020 proved to be one of the strongest years of performance in this industry’s recent history – which has landed alternatives firmly back on the radar of investors globally – it’s always worth reminding ourselves of the bigger picture and a broader perspective.
Indeed, longevity is very much a watchword for Dixon Boardman, the pioneering founder and CEO of New York-based multi-manager group Optima Asset Management, who forthrightly declared this week that “hedge funds are back”.
The veteran hedge fund investor has pinpointed Asia – especially China and India – along with the healthcare sector, and concentrated ‘best ideas’ stock-picking by top long/short equity managers, as three key areas of interest that he believes are driving industry successes.
Meanwhile, as media reports speculate that hedge funds have regrouped and are once again building out risk following the recent retail-driven carnage, the impact of the GameStop saga is predicted to reverberate across the industry for some time yet.
Peter Hillerberg, of London-based equity research firm Ortex Analytics, said the episode shows that the information advantage previously held by financial institutions has been dismantled, heralding a fundamental change in the way markets work and “far reaching consequences” for hedge funds and short sellers.
Hugh Leask
Editor, Hedgeweek