As hedge funds continue to strengthen their transparency on environmental, social and governance (ESG) metrics, certain complexities remain over how managers should approach reporting and shorting.
While private equity firms see ESG as an investment opportunity, many hedge funds – particularly those outside the traditional long/short equity sphere – are still in the early stages of implementing ESG policies and processes and are bumping up against an assortment of challenges, particularly over how to measure existing exposures, derivatives and shorts, Trudi Boardman, hedge fund specialist at Cambridge Associates told Hedgeweek this week.
Los Angeles-based TrueRisk Capital – a newly-established fully-systematic CTA manager which trades a range of algorithm-based options and futures strategies – is set to launch its debut fund. The firm, which is headed by WorldQuant University founding member and faculty member of Rito Bhattacharyya, is rolling out an equities-based volatility income strategy built around the “all-weather” investment models he has developed over the course of almost nine years.
Elsewhere, hedge funds betting against Sainsbury’s saw their bearish bets battered after the FTSE 100-listed supermarket giant soared following rumours of a takeover bid from US private equity firm Apollo. Sainsbury’s – which only last month was found to be the second most-shorted name among London-listed stocks, according to industry analysis – spiked some 15 per cent earlier this week, denting those managers positioned short on the retailer.
Despite market volatility falling during August, hedging activity remains robust, according to market analysis by Man Group. Portfolio managers at the London-listed global hedge fund group noted that relatively low realised volatility, coupled with a flood of short-dated options from a number of volatility sellers, has pushed the S&P 500’s implied volatility to its lowest level since 2017. But demand for certain hedging products has stayed high among many managers, options market analysis shows.
One hedge fund repositioning its portfolio for renewed volatility up ahead is metals and mining-focused specialist Delbrook Capital.
While the Vancouver-based firm’s long/short equity-focused strategy, the Delbrook Resource Opportunities Master Fund, scored a 3 per cent gain last month, swelling its year-to-date return to 31 per cent, founder, CEO and portfolio manager Matthew Zabloski believes the gradual easing of monetary policy in the coming weeks may herald a fresh round of market volatility. As a result, the manager – which trades a broad range of precious and base metals-focused stocks – has cut its net long exposure and is increasing portfolio level hedging and single name equity shorts.
With the Hedgeweek Americas Awards rapidly approaching, no fewer than seven funds are in contention for two event driven-focused categories this year – a keenly-watched corner of the hedge fund industry as managers running an assortment of activist, merger arb, special situations and distressed strategies continue to capitalise on rebounding corporate activity opportunities.
The categories are among 29 fund manager awards voted for by participants within the hedge fund industry and announced at an exclusive presentation ceremony and industry networking event hosted by Hedgeweek in New York on 21 October.
Hugh LeaskEditor, Hedgeweek