hedgeweek hugh leask captioned.jpg Hedge funds’ ability to withstand – and indeed flourish – during market pressure and successfully weave through disruption has again been brought into sharp focus in recent weeks.

Following a lively first three months of the year, industry confidence is soaring following a sustained run of positive returns. Strong Q1 performance across strategy classes has strengthened managers’ outlooks on their own business prospects for the year, according to the latest Alternative Investment Management Association’s Hedge Fund Confidence Index.

As the GameStop and Archegos episodes that buffeted the industry earlier in the year ultimately proved short-lived, investors are now turning to hedge funds to manage downside risk from market volatility and outperform most other asset classes, according to AIMA, Simmons & Simmons and Seward & Kissel. They noted allocators poured an estimated USD24 billion into hedge funds during the first two months of this year – the best two-month start since 2014.

AIMA’s Hedge Fund Confidence Index findings also chime with eVestment’s first-quarter metrics, which this week revealed that the biggest hedge funds picked up the pace in March to generate above-average gains, after lagging the rest of the hedge fund industry in the early part of 2021.

Elsewhere, publicly-traded hedge fund giant Man Group said on Friday its funds under management had swelled by USD3.4 billion to USD127 billion in Q1, driven by investment performance and continuing net inflows.

Oil-focused hedge fund Westbeck Capital Management’s flagship Energy Opportunity Fund continues to outflank sector benchmarks, with the sector specialist maintaining positive momentum during the recent slide. The firm said this week that the “healthy correction” in oil prices will bring attractive buying opportunities as economies gradually unlock from the coronavirus restrictions.

Similarly, market disruption earlier in the year heralded solid Q1 gains for Quantumrock’s main systematic equity tail hedge strategy.  The machine learning fund successfully traded rising volatility brought about by equity market dips in February, and took profits from US treasuries movements.

The coronavirus crisis has shown how never-before-seen exogenous events can send even the most sophisticated algorithms sideways, leading to short-term disruption in computer-driven hedge fund models. In this week’s feature story, Hedgeweek’s editor-in-chief James Williams delves into quantitative funds’ prospects following a tricky 12 months, and weighs up the potential for managers running AI strategies to utilise certain human traits in order to better respond to extreme events as they unfold in real time.

Hugh Leask
Editor, Hedgeweek



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