Hedge Funds

Hedge Fund Update: Fourth Quarter 2019

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Major global equity markets enjoyed healthy gains in fourth quarter 2019 and generated double-digit returns for the full calendar year, in stark contrast to the broad-based declines experienced in 2018. Hedge fund performance also bounced back last year, finishing 2019 on a high note. While hedge funds fared better in 2019, disappointing alpha generation at the overall industry level in recent years has resulted in a large disconnect between limited partners’ performance expectations and hedge fund fees and terms.

Review of Market Performance: Calendar Year 2019

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The gradual abatement of geopolitical risks, and a renewed accommodative stance from global central banks, led to a strong rebound in risk sentiment in 2019. Equities led the way higher, while interest rate cuts ensured fixed income markets participated in what was a robust year for asset classes across the board. This chart book explores global asset returns and the factors influencing performance last year.

Friend or Foe: Hedge Funds Versus Alternative Risk Premia (Euro Edition)

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It has been a challenging time for hedge funds in recent years. Loose monetary policy has driven equity markets upwards and hurt short books. The growth of quantitatively traded funds has eroded some of the inefficiencies commonly exploited by hedge funds. This fact, coupled with the shift toward low-fee passive and alternative risk premia (ARP) products, has raised questions about the merits of hedge funds in investor portfolios. In this paper, we focus on comparing ARP versus hedge funds and investigate whether hedge funds and ARP funds are complementary or whether ARP funds are actually a viable replacement for hedge funds.

Alternative Risk Premia: A Diversifying Option for Investors (Euro Edition)

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Elevated equity market valuations and potentially rising bond yields suggest the return environment for traditional risk assets could be difficult. Faced with this challenge, institutional investors are seeking alternative sources of return. Alternative risk premia strategies—which harvest well-established risk premia and market anomalies across asset classes—may fit the bill.

Hedge Fund Update: First Quarter 2019

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In this quarter’s edition, our focus continues to be on fundamental equity long/short managers, but now from an internal perspective. The overall strategy performed well during first quarter 2019, capturing more than 60% of the strong gains generated by the MSCI All Country World Index. While the extreme market action of the last two quarters occurs infrequently, this type of trading environment can provide useful insight into portfolio manager behavior and psychology. Analyzing portfolio management decisions, as opposed to stock selection or external factors, though interconnected, can help improve future manager selection.