Hedge Fund Focus: July 15, 2016
In case you missed them, here are the hot topics in the hedge fund/alternatives space this week…
Though Brexit gave us all a scare, June marked the fourth consecutive month of gains for the industry, a much needed boost following last year’s and Q1’s volatility. Here’s a breakdown of indices’ June performance:
Despite things turning around, Credit Suisse reported that 84 percent of investors redeemed money in some capacity in the first half of 2016, including New York State, which announced it would reduce its investments this week. However, Towers Watson reported conflicting information, finding that, although small, investors have increased their allocations over the last year.
Either way, managers are split on what the rest of the year holds for hedge funds and Morgan Stanley is attributing overcrowded trades as the source of industry performance problems, which Point72 seconded.
Strategy Performance: CTAs continue to outperform other strategies; upward swings in the Yen and U.S. dollar have brought macro funds some much needed relief; and despite all the market uncertainty, multistrat funds are holding steady
Manager Performance: Unfortunately, Julian Robertson's guidance may not always reign supreme as several of his Tiger Cubs dug themselves into deep holes in the first half of the year. However, Seth Klarman has reason to celebrate. Baupost pulled in 4 percent in the first half of the year after experiencing three straight years of losses.
In the regulation arena, ValueAct agreed to pay a record $11 million fine to settle a Justice Department lawsuit over allegations the firm violated antitrust laws when it purchased $2.5 billion in shares of Baker Hughes and Halliburton in 2014. Additionally, the Fed gave banks a one year extension to comply with the Volcker Rule’s ban on investing in PE and hedge funds. Though nice, it’s not a huge help for goliaths like Goldman Sachs and Morgan Stanley who still need to figure out how to exit billions of dollars of holdings in a short time without losing money.
Weekly Reads: Financial Times wrote an interesting story analyzing who performs better, star manager or investment teams, finding that though investor fees are higher with star managers, they bring in bigger returns. Pensions & Investments also wrote a piece about the growing popularity of managed accounts, which many managers view as the path for capital growth in coming years.