Quant Industry News Summary (20.01.2021)

Key market indices
- S&P 500: 3,798.91 +0.81%
- DJIA: 30,930.52 +0.38%
- HSI: 29,794.41 +0.51%
- STI: 2,994.35 -0.05%
- Gold Spot: 1845.10 +0.29%
- Brent Crude: 56.02 +0.21%
- Bitcoin: 36,195.45 -0.11%

Global hedge funds struggle even in a more open China market (Link)
- In November, China expanded access for foreign institutions, allowing them to invest through private securities funds, the local version of hedge funds.
- Despite the policy easing, most existing hedge fund products remain off limits for qualified foreign institutional investors
- Chinese investors give preference to local firms such as Shanghai Greenwoods Asset Management and Perseverance Asset Management.
- Global managers expressed frustration at the limitations they face, as well as the lack of tax incentives. However they got few assurances of further easing ahead.

Orbis isn't afraid to refund fees for poor performance (Link)
- The firm’s flagship Orbis Global Equity fund has had a compounded annual return of 11%, outperforming its benchmark since inception.
- Orbis fulcrum fee: Investors pay nothing unless the firm beats its global benchmark; when that happens, clients pay 25% of the outperformance.
- Managers believe this fee structure aligns the firm's interest with clients. Orbis and its employees are the fund’s largest investors.

Gold steadies with traders weighing lower dollar, growth outlook (Link)
- U.S. equities pushed toward all-time highs and U.S. Treasury yields advanced, eroding demand for gold
- The metal is still seen as an inflation hedge with the possibility that further stimulus could weaken the dollar and lift consumer price.
- Hedge funds cutting longs by 31% last week is a clear sign that current price action is not giving any strong buy signals.
- Spot gold lost less than 0.1% to $1,840.14 an ounce. Bloomberg Dollar Spot Index declined 0.2%.

Bitcoin’s inefficiencies are creating arbitrage trades for crypto hedge funds (Link)
- Investors increasingly use bitcoin as a hedge against falling real yields and inflation risks stemming from central bank quantitative easing.
- Bitcoin’s charge helped HFR’s Blockchain Composite Index soaring to a 190.1 per cent return in 2020.
- Appetite for BTC will now likely cool off for the time being, the potential structural risk of tougher regulation, speculation risk and the absence of a central authority to step in during crises.
- Lyxor Asset Management expects the latest cold shower to moderate institutionals’ enthusiasm for crypto in the short-term, providing time to prepare for a third run later.
- Bitcoin’s volatility could also be seen as “price discovery” in a new asset class, which will give way to greater stability and more credibility.

Active-management alpha now key to hedge funds’ success, as economies emerge from Covid slump (Link)
- Vaccination challenges, virus mutations, subsequent waves of new infections, and renewed lockdowns could keep volatility and dispersion elevated, creating opportunities for active management.
- K2 Advisors’ outlook suggested inflation “will inevitably surface” if earnings, growth and sentiment jump the gun on the recovery, though a period of reflation could boost equities.
- "It is prudent to be growth-oriented in our portfolio positioning while also holding hedged alternative investments that exhibit low correlations to broader risk assets." says K2.
- K2 provides a range of investment products including custom-tailored investment programs, commingled funds of hedge funds, strategic advisory with multiple strategies.

Quant Pioneer Jim Simons Steps Down After 40 Years at the Top (Link)
- The chairman of $60 billion Renaissance Technologies, makes a formal exit. Simons helped pioneer the math-and-computer-loving field of quantitative investing.
- He will remain a member of the board and Chief Executive Officer Peter Brown will become chairman.
- Renaissance’s public funds lost more than 30% last year, while private fund Medallion was up more than twice, according to a person familiar with the matter.