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Hedge funds outperform major US equity indexes in February

Financial Analyst Work on a desktop with a multi-screen workstation with real-time stocks, commodities and forex charts.  Businessman working at Investment Bank City Office at night.

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In February, hedge funds outperformed the performance of major indexes, gaining 0.3%, according to the PivotalPath Composite. Table of contentswhile the S&P 500 fell 3.0% and the Nasdaq fell 3.4% in the same month.

Preqin is also seeing strong hedge fund returns. Hedge fund all its strategies benchmark returned 3.43% in February, building on January’s 2.03% gain and bringing 12-month returns to nearly 26%.

Data provider PivotalPath said the S&P 12-month composite beta through February was 0.16.

By strategy, global macro and managed futures led all strategies in February, generating 2.2% and 1.3% respectively. The equity sector performed the worst, largely due to losses in the technology, media and telecoms and healthcare sub-strategies.

Smaller funds appear to have the edge over larger funds last month, with AUM 500 million – $1 billion firms posting the best gains, up 0.45%. Funds with more than $5 billion in AUM fell 0.8% in the same month.

The shift in value over growth continued to gain traction in February, with PivotalPath’s proprietary Cyclic Shopping Cart outperforming the Sector Basket with 4.2% growth.

“Multi-Strategy, Managed Futures, Global Macro and Credit all outperformed for the month and continue to generate top alpha,” the company said. “Commodities, especially oil, hit new highs not seen in a decade, which, coupled with continued volatility, has benefited macro- and globally-managed Futures funds, who captured the right side of the deal.”

In addition, the hedge fund space is attracting more and more players. Quantum technology provider SigTech says new fund launches remain strong, with an average of nearly 2,000 new funds per year, as of 2019. Of the 5,500 new hedge funds starting in 2019, 70% have based in the US, 9% in the UK and 5.2% in China.

Daniel Leveau, vice president, investment solutions at SigTech, said: “The robustness of new hedge funds reflects the sustained strong demand among investors for innovative investment strategies. and uncorrelated to meet profit expectations in an increasingly challenging market environment.”

Cryptocurrencies are gaining traction as a hedge fund strategy. In 2021, about 171 crypto hedge funds were launched, bringing the total of the strategy to 774. Of those, 80% are located in the US.

Note that some of the more traditional investment firms are forming businesses that give investors access to hedge-fund-like strategies. Case in point: Fidelity Investment has start a liquid replacement unit.

Look at ETF’s Early Year Performance to mimic the performance of hedge funds: GURU, ALFA, QAI, HDG.

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