Spike in bond yields dented some hedge fund February returns (Link)
A sharp spike in bond yields last week caught some hedge funds unaware, and saw macro and long-short funds in general give back February profits to end the month modestly up.
Long-short equity funds do not take bets in the bond market but many failed to anticipate the spillover from the bond market, which shaved $2 trillion from global equities.
Equity funds went from having a "monster month" up 4-6% with one as high as 11% to only gaining 2-3%.
Derivatives are replacing bonds as some fund managers' new hedge (Link)
Risk-averse institutional investors are increasingly turning towards derivatives for protection amid a perilous time for global debt markets.
All manner of complex solutions, from put options to receiver swaptions, are gaining traction as a way to overcome the drawbacks of bonds as a hedge after debt failed to insulate portfolios at key moments last year.
Rather than simply grouping all derivative-based strategies under the same "highly risky" label more people are seeing them as effective risk-management tools.
Asia hedge funds pare bets on green energy after 2020 surge (Link)
Asia hedge funds that rode a green investing wave for double-digit returns last year are starting to reduce bets on the sector given the lofty valuations.
Apeiron Capital has cut Tesla Inc. to a small position after the electric vehicle maker's eight-fold surge sparked a 98% return for the $400 million hedge fund in 2020. York Capital also trimmed investments in electric vehicles, battery and solar glass makers.
Sustainable investments, together with shifting consumer behavior amid the pandemic, helped Asia managers beat peers in the best year for global hedge funds in at least seven years. Though many Asia hedge fund managers still like the long-term outlook for sustainable investments, valuations look stretched.
Mania in first bitcoin ETF cools in Canada after robust debut (Link)
During its first two days of trading, the Purpose Bitcoin ETF saw almost $400 million shares change hands. On Tuesday, that amount dropped $17 million.
The initial surge in interest was evidence of some combination of pent-up demand, investors switching from other means of getting Bitcoin exposure, and the fact that Bitcoin's price was notching new highs as the Purpose ETF began trading.
Morningstar's global director of ETF research, Ben Johnson, believes that longer term, I expect volumes will be correlated with BItcoin's price.
Hedge fund giant Man Group sees funds under management hit record high as alternative strategies rise (Link)
Man Group has seen its funds under management hit record highs, with its hedge funds and alternative strategies posting strong performances amid 2020's unprecedented coronavirus-fuelled turbulence, despite a fall in annual pre-tax profits for the company.
The group's alternative funds under management - which span absolute return, total return and multi-manager solutions - rose to USD77.2 billion by 31 December 2020, up sharply from the previous quarter's USD72.4 billion.
Man Group's alternative funds - which include an assortment of discretionary and quantitative hedge fund strategies focused on a variety of asset classes and markets - were mostly in positive territory next year.
How data is driving quant hedge fund Aspect Capital's global macro gains (Link)
With the shape of the post-pandemic recovery still in flux, London-based quantitative hedge fund firm Aspect Capital believes its computer-driven global macro strategy is well positioned to capitalise on both short-term market dislocations and medium-term trends this year, as well as benefiting from relative value opportunities amid the varying recovery speeds.
Despite the tumultuous events of 2020, the Aspect Systematic Global Macro Strategy generated positive returns during "multiple market environments" thanks to a diversified set of trading models.
The fund is made up of 30 trading models across 14 investment themes, targeting shorter-horizon alpha opportunities in liquid financial futures and forwards markets. Specifically, it utilizes a systemic relative value approach to global fixed income, stock indices, currency and volatility investing.
Gaining 6.35% for the year, most of the fund's first-half gains came from bonds amid investors' rapid flight to safety and the subsequent stimulus packages influence on flation expectations. The second-half returns meanwhile were dominated by trends in equity markets.