Harshil Lahoti’s Post

Despite market volatility and recession concerns, several hedge funds posted solid returns in August. According to Bloomberg, 𝗦𝘁𝗲𝘃𝗲 𝗖𝗼𝗵𝗲𝗻’𝘀 𝗣𝗼𝗶𝗻𝘁𝟳𝟮 gained 1.6%, while 𝗪𝗮𝗹𝗹𝗲𝘆𝗲’𝘀 𝗢𝗽𝗽𝗼𝗿𝘁𝘂𝗻𝗶𝘁𝗶𝗲𝘀 𝗙𝘂𝗻𝗱 led with a 3.4% increase. 𝗦𝗰𝗵𝗼𝗻𝗳𝗲𝗹𝗱, 𝗖𝗶𝘁𝗮𝗱𝗲𝗹, and 𝗘𝘅𝗼𝗱𝘂𝘀𝗣𝗼𝗶𝗻𝘁 each earned around 1%, 𝗠𝗶𝗹𝗹𝗲𝗻𝗻𝗶𝘂𝗺 up 0.7%. Meanwhile, 𝗕𝗼𝗯𝗯𝘆 𝗝𝗮𝗶𝗻’𝘀 new hedge fund faced early losses, down 0.5% in August. Tough conditions led firms like 𝗠𝗶𝗹𝗹𝗲𝗻𝗻𝗶𝘂𝗺 and 𝗕𝗮𝗹𝘆𝗮𝘀𝗻𝘆to scale back some positions. Yet, 𝗪𝗮𝗹𝗹𝗲𝘆𝗲 outperformed, driven by strong long/short and quantitative strategies. Full Bloomberg report below ⤵

Many hedge funds were caught off guard by 2023's surge in bond yields and the performance of most of them lagged stock market indexes. Hedge funds in 2023 averaged a 5.7% return in the year through November. By contrast, the S&P 500 index rose over 20% last year. But a handful of hedge funds were able to navigate a choppy year and achieved double-digit gains. Among them, SoMa Equity Partners beat the S&P 500 stock index and the Nasdaq Composite (.IXIC) with a whopping 62% result, according to research by Reuters. For long/short equity strategy, Anson Funds' Investments Master fund posted a strong rise for the year matching that of S&P. The $299 million Mulvaney Capital Management Limited posted a 51.22% return, said a source to Reuters. While large multi-strategy firms including Millennium Management and Citadel's Wellington Fund surged passed bond markets with 10% and 15.3% returns, reported by Bloomberg on Wednesday. What does this tell us? This highlights, more than anything, the importance of product curation in the investment decision making process. It also demonstrates the value of having a skilled managers behind the fund that can make the right market calls in a very uncertain market environment. Although hedge funds, as an asset class, underperformed the equity market in 2023, investors that have gotten into the right funds managed by skilled managers were able to far outperform the indexes. Are you a capital allocator looking for skilled managers to invest in 2024? Register for a FundKernel | InvestTech | WealthTech account at https://lnkd.in/g4J_iQaC. #fintech #wealthtech #investTech #fundTech #assetmanagement #wealthmanagement #investmentmanagement #portfoliomanagement #alternativeinvestments #hedgefunds #liquidalternatives #privatebanking #privatewealth #multistrategies #equitylongshort #privatecredit #fundkernel

I read an article recently that showed the returns that some of the top hedge funds delivered in 2023. Here are a few specific examples, but on average, hedge funds generated an average of 5.7% return in 2023: - Citadel: 15.3% - Millenium Capital Management: 10% - Bridgewater Associates (Pure Alpha): -7.6% Another data point - even the S&P 500, a good indicator of overall stock market performance, has only average a little over 10% since 2020 (adjusted for inflation, its actually closer to 6%). Thats also aligned with long-term performance of the index. Reading this makes me even more proud of what we have accomplished at Emerald City Associates. The lowest avg return we have generated from a fund is 34%, but we have been able to consistently deliver 50%+ average returns. In 2023 itself, we exited two complexes that even generated 150% and 290% IRR. While nothing is ever guaranteed, if we delivered a return like the hedge funds I mentioned above, we would consider it a failure - as that isn't good enough for us. We specifically locate undervalued assets that have a value-add component (such as below market rents and CAPEX improvements to increase profitability). If we can locate an asset like this, in a small/mid-sized market that is close to a larger sized metropolitan area, at a low cost-basis (price point) - then we are confident we can consistently out pace any hedge fund out there. This is why I truly believe that we do ourselves a disservice by simply keeping too much of our investment in the stock market - as there are SO MANY better options out there to grow wealth. Always happy to share more about what we do, or why I feel the stock market isn't the only (or best) way to growth wealth - so reach out if you want to chat! #EmeraldCityAssociates #ValueAddInvesting #Returns

CAIA Association just published a short article I wrote on multi-strat #hedgefunds. To be clear, I'm a long time critique of many hedge fund fee structures, but multi-strats really look nothing like the typical #hedgefund of yore. If they can deliver cash plus 8% net with no correlation to anything, every penny of fees is worth it. My concern is that allocators can be willfully blind to structural changes when scrambling to invest in an area that has been on a hot streak -- Morningstar has done good work on this. Very smart people have pushed back on two points: 1. They believe there is a large pool of talented managers who will perform far better running a pod than a standalone hedge fund. Give them money, let them focus on alpha generation and watch them like hawks. Millenium Capital Management and Citadel have shown this is possible; the second tier tends to support my thesis of diminishing returns. 2. Higher rates go both ways: sure, financing costs are higher, but so too should be expected returns. For instance, shorting stocks looks far more attractive when the rebate is positive, something raised by AQR Capital Management. And it's fair to say that these firms will get the best financing terms in the Free World. So we shall see how it all plays out! https://lnkd.in/e7YTU6nG

🚨 Hedge Fund Face-Off: Fee Cuts vs. Fee Hikes! 🚨 𝗕𝗿𝗲𝘃𝗮𝗻 𝗛𝗼𝘄𝗮𝗿𝗱 and 𝗖𝗮𝗽𝗶𝘁𝗮𝗹 𝗙𝘂𝗻𝗱 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 (𝗖𝗙𝗠) are taking radically different paths in the competitive world of hedge funds. One is cutting fees to manage costs, while the other is hiking them to stay ahead in the quant arms race. While the two are not direct competitors given their contrasting trading styles, I find it interesting the fees are going in different directions nonetheless. Brevan Howard Asset Management is slashing fees for its Alpha Strategies fund to manage high tech and talent costs. The management fee has been cut to 0% until the new year, then to 0.5% for one quarter, before reverting to 1%. Despite these adjustments, the fund, with $12.2 billion under management, faced a 3.6% loss this year through May. 📉 Capital Fund Management (CFM), on the other hand, is increasing its performance fee to 30% for its flagship Stratus fund, which has gained 8.7% this year. CFM's $11.7 billion Stratus fund excels in the quant arms race, boasting a robust 18.3% gain in 2022. 📈💹 While Brevan Howard is restructuring to reduce expenses, CFM is capitalising on market volatility and the demand for cutting-edge quant strategies. How will this play out? Time will tell. ⏳ Check out the CFM article here: https://bloom.bg/3SmtdGh And the Brevan article here: https://bloom.bg/3WxMoQ1 #hedgefunds #quantitativeresearch #portfoliomanagement #financialmarkets #investmentstrategy #fintech

The 20 leading funds made $67 billion in investor profits in 2023, up from the $65 billion recorded during the pandemic-era rally of 2021, according research Monday from LCH Investments, a fund of hedge funds. That’s also around triple the $22.4 billion fund managers earned for investors in 2022. Overall, the fund management industry recorded gains of $218 billion after fees, according to LCH Investments estimates. The top funds — identified as those which have performed best in dollar terms since their inception — accounted for around one-third of annual profits last year, despite managing less than a fifth (19%) of the industry’s assets. Included among the best performers were Christopher Hohn’s TCI, Ken Griffin’s Citadel and Andreas Halvorsen’s Viking.

In the face of the looming uncertainty in 2024, hedge fund investors are prioritizing manager skills and commitment over historical performance. With varying economic nuances across Asia and rising inflation concerns, adaptive strategies and quick execution have become vital for hedge funds. Co-investment signifies alignment of manager interests while embracing new tech with a balanced approach to maintaining investor trust. Hear what industry experts including Vincent Hua, Managing Director at AL Capital, Jack Ronaldson, CFA, Investment Manager, at Spotlight Group, Harvey Kalman, Chairman, at Connexian, Ed Pegoraro, COO, at Molokai Capital and Christy Lai, APAC Head of Partnership and Alliances at Enfusion have to say about navigating the 2024 hedge fund environment. In the long-term, geopolitical volatility often has limited impact. Read Enfusion’s blog for more predictions for the 2024 global hedge fund environment: https://bit.ly/41XcvkB #hedgefunds #investmentstrategy #2024predictions

Hedge funds have revolutionized the financial landscape since their inception in 1949. From pioneering strategies to controversial practices, these investment vehicles continue to shape global markets, offering potential for high returns while navigating complex regulations and evolving technologies in the modern financial era. #hedgefunds #alfredwinslowjones #longshortstrategy #leverage #georgesoros #quantitativestrategies #jimcramer #warrenbuffett #stevecohen #kengriffin #alphageneration #2and20feestructure #artificialintelligence #esginvesting #performancefees

New Post: Rising Markets Lift Hedge Funds to Huge Gains - As stock markets soared in 2023, so did the fortunes of many of the world’s biggest hedge funds.The 20 best-performing hedge funds made $67 billion in gains last year, triple what they reported in 2022, according to data released by LCH Investments, a so-called fund of funds that ranks the top 20 firms on lifetime gains, after fees.The strong performance by elite financiers follows the rally that stock markets have enjoyed over the past year. The S&P 500, Wall Street’s most widely followed benchmark, hit a record last week. That has benefited hedge funds, especially those that make focused bets on individual stocks. Many in the industry have invested heavily in the “Magnificent Seven” tech stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — though some on Wall Street have grown increasingly worried that too many investors are betting on the same companies.In some ways, the data reflects the growing divide between the industry’s top players and everyone else. The top 20 firms oversee just under 19 percent of the industry’s $3.5 trillion in assets under management, yet they represent 46 percent of the sector’s total lifetime gains.At the top of the list for 2023 performance was TCI, an activist hedge fund run by the financier Christopher Hohn, which reported $12.9 billion in net gains. Other top performers last year include Citadel, D.E. Shaw, Millennium and Elliot Management.The big firms that reported losses last year include Bridgewater Associates, the firm founded by the outspoken billionaire Ray Dalio, and Caxton Associates.Returning to the top 20 by lifetime returns in the latest ranking was Pershing Square Capital Management, the firm run by William A. Ackman, who is perhaps best known recently for demanding the resignations of the presidents of M.I.T., Harvard and the University of Pennsylvania over concerns about their handling of antisemitic acts on campus. #Rising #Markets #Lift #Hedge #Funds #Huge #Gains https://lnkd.in/dF_DBRnd

History sometimes repeats itself. And in the case of “portable alpha”, a revival is underway in 2024. However, this time it is driven by #hedgefunds themselves.   Jon Caplis shares some insights with Alex Morrell for Business Insider, on the growing return of “supercharged index investing,” a concept developed in the 1980’s but largely abandoned after the Great Financial Crisis. Given the high interest rate environment, it’s a way to capture exposure to a target benchmark and then supercharge it with actively managed alpha.   Jon notes that many hedge funds are realizing that portable alpha offerings to select benchmarks can help maintain existing clients but also institutionalize their business by providing bespoke solutions to investors. On the demand side, it’s also a “nice way of smuggling hedge funds into your portfolio if you're an allocator.”   Will it last when interest rates subside?   Check out the link below for more details. #portablealpha #hedgefund   https://lnkd.in/eGmB64mD