Algo Capital Group’s Post

Nam Nguyen, Ph.D. Concur with research. We see similar relationship in Indian market as well. #Market Neutral and #Trendfollowing are very few unique strategies which has positive correlation during uptrending market and negative correlation during downtrending market effectively leads much required diversification in portfolio #systematictrendfollowing #systematicmarketneutral

Do Hedge Funds Add Value? The study showed that the correlation between market-neutral hedge funds and the stock market changes according to the market regimes. Specifically, the correlation is negative in bear markets and positive in bull markets. - This paper explores the relationship between hedge funds and the market portfolio, with a focus on financial cycles. - Hedge funds, being dynamic investment vehicles, show performance changes based on market conditions. - Evidence shows that market neutral and other hedge fund styles exhibit tail dependence during bull markets, but not during bear markets. - Unlike other hedge fund styles, market neutral hedge funds' correlation with the stock market varies with the economic state. - This behavior is linked to hedge fund managers' ability to time market regimes, allowing market neutral hedge funds to adjust strategies based on financial cycles. Reference: Crego, Julio and Galvez, Julio, Cyclical Dependence in Market Neutral Hedge Funds. Banco de Espana Working Paper No. 2141, SSRN #hedgefund #investing #portfoliomanagement Abstract We examine linear correlation and tail dependence between market neutral hedge funds and the market portfolio conditional on the financial cycle. We document that the low correlation between these funds and the S&P 500 consists of a negative correlation during bear periods and a positive one during bull periods. In contrast, the remaining styles present a positive correlation across cycles. We also find that these funds present tail dependence only during bull periods. We study their implications for market timing and risk management.

Global hedge funds trebled client gains during 2023   The top 20 hedge funds globally generated $67 billion for investors during 2023, which was three times what they returned in 2022. Data published by Reuters said Bridgewater Associates and Caxton were the only two firms among the 20 whose funds posted losses.   On average, the top 20 funds were up 10.5% last year while the industry overall returned 6.4%, says the report quoting LCH Investments. Over the years, multi-strategy funds have used a lot of leverage to help returns. During 2022, at least eight of the top 20 hedge funds lost money on market turbulence caused by the war in Ukraine and the interest rate hikes from the Fed as part of its measures to tame runaway inflation. 

🌐 [#Alternatives] How alternative hedge fund managers have navigated 2023 and which strategies may be better placed to face H1 2024? ❔   ▶ Key macro themes that have driven 2023 are likely to continue during 2024, at least at the beginning, namely high inflation, rising interest rates and slowing growth or soft landing. While investors are benefitting from better macro clarity and directionality, further tightening from central banks is expected as the impacts on major economies emerge.   ▶ Historically low correlated to traditional asset classes, alternative hedge funds have naturally benefited from this high-rate environment. Combined with above average volatility and continued market uncertainties, attractive arbitrage opportunities may arise for some alternative hedge fund strategies, leading to alpha creation.   👉🏼 To hear more about the 2024 perspective for hedge funds, please reach out to your Amundi contact to access the replay of the Hedge Fund Outlook webinar where Jean-Baptiste Berthon, Senior Cross Asset Strategist at the Amundi Institute, discussed the current macro environment and its implications for the asset class.   To learn more about Amundi Institute’s Investment Outlook for 2024, please visit https://lnkd.in/eEasj7mB

Equity hedge funds lose $150 billion over five years   Equity hedge funds, known as among the oldest and most popular fund strategies, saw client withdrawals to the tune of around $150 billion over the past five years. A news report said this was due to investors tiring of their inability to capitalize on bull markets or guard against slumps.   The equity long-shorts that seek to buy stocks likely to do well and bet against those that could perform poorly, have underperformed the markets in nine out of the past ten years, says the report quoting Nasdaq eVestment.   The poor performance and outflows were a result of these funds failing to adapt to markets that central banks have dominated. In the past, these funds were known for their star story pickers that allowed equity long-shorts to hedge against overall market fluctuations by betting on both winning and losing stocks. Data group HFR notes that the strategy made double-digit returns in almost every year of the 1990s bull market. 

Systematic hedge funds, using algorithms to track market trends, have shown remarkable performance in the first quarter of 2024, surpassing other fund strategies. With an average gain of nearly 9% in the initial two months, against the industry average of 2.6%. The success of these funds reflects the volatility in global markets. While the US S&P 500 index increased by over 11%, Hong Kong's Hang Seng index dipped by about 2%, and Japan's Nikkei index increased over 20%.

China Probes Hedge Fund With 795% Product Gain, Owner Missing. Ruifengda suspected of alleged illegal activities: regulator. Regulators have been tightening scrutiny over the industry. China is probing a hedge fund firm with stellar returns after it stopped repaying investors, following tightening scrutiny on the 5.5 trillion yuan ($760 billion) industry. https://lnkd.in/gPKHFgM4 China Probes Local Hedge Fund for Suspected Illegal Activities. "China’s securities watchdog said it is investigating hedge fund Zhejiang Ruifengda Asset Management Co. for suspected illegal activities, while media reports said the fund has failed to pay investors seeking redemptions and that the controlling shareholder is missing." https://lnkd.in/gPKHFgM4

In July 2024, hedge funds nearly matched global equities' performance, with the Preqin All Hedge Fund Index gaining 1.61%, just shy of the MSCI World Index's 1.78%. This is the smallest performance gap since July 2019. While bond and small-cap equities boosted hedge fund returns, declines in metal prices and stalled tech stock growth created mixed results. Despite a rise in assets under management to $4.7 trillion, hedge funds faced $9 billion in net redemptions, although niche strategies, like crypto and insurance-linked funds, performed well and continued to attract investment.

In July 2024, hedge funds nearly matched global equities' performance, with the Preqin All Hedge Fund Index gaining 1.61%, just shy of the MSCI World Index's 1.78%. This is the smallest performance gap since July 2019. While bond and small-cap equities boosted hedge fund returns, declines in metal prices and stalled tech stock growth created mixed results. Despite a rise in assets under management to $4.7 trillion, hedge funds faced $9 billion in net redemptions, although niche strategies, like crypto and insurance-linked funds, performed well and continued to attract investment.

In July 2024, hedge funds nearly matched global equities' performance, with the Preqin All Hedge Fund Index gaining 1.61%, just shy of the MSCI World Index's 1.78%. This is the smallest performance gap since July 2019. While bond and small-cap equities boosted hedge fund returns, declines in metal prices and stalled tech stock growth created mixed results. Despite a rise in assets under management to $4.7 trillion, hedge funds faced $9 billion in net redemptions, although niche strategies, like crypto and insurance-linked funds, performed well and continued to attract investment.