Investors want hedge funds to 'stick to their guns' and not try to 'be heroes' as markets get turned upside down

Business Insider Finance 2 months ago

The markets are causing a panic. But investors are hoping hedge fund managers trust their process and stick to their strategies.

A crash in high-flying growth stocks last week smacked momentum-tracking hedge funds, with one US pension seeing its trend-following funds surrender their August gains in a couple days. And a huge spike in crude oil prices this week hit many funds with bearish views on the commodity.

The best thing whip-lashed hedge funds can do right now is stay the course, said Jon Aikman, a finance professor at the University of Toronto. He sits on the school's endowment and pension investment committees, which allocate more than $5 billion.

He wants hedge fund managers to "stick to their guns and continue what they are doing."

"If they see dislocation they can take advantage of, go for it, but I don't want to see a big sell-off," Aikman told Business Insider. "If they're just going to sell out, I can get an ETF to do that."

In an email, David Bahnsen, a wealth manager at Bahnsen Group who manages more than $1 billion, said "in times like this, and any other time, our objective with hedge funds is, always and forever, non-correlation."

"An absolute return objective is preferred, but we are never looking for our alternative strategies to 'lean into' volatility or momentum, on either side," Bahnsen wrote.

Likewise, another allocator to hedge funds said he doesn't look for managers that "try and be heroes" during times of market stress.

One hedge fund manager with total assets in the billions said they try to explain to investors that drawdowns happen in times like these, adding that "it's how you react to market dislocation that makes a fund."

Cautious institutional investors like pensions, endowments and foundations have already pressed hedge funds to think more long-term. Hedge funds' equity exposure meanwhile is at the lowest level in a decade.

On the other hand, hedge funds are under pressure to prove their worth to investors who have complained about the industry's high fees. Many managers are seeing opportunities in the fragmented market.

One hedge fund that focuses on technology stocks was excited for the "reset" of the market for growth stocks, which were hit hard during momentum's slide last week.

Another fund that looks to make money in times of market stress said it usually sees inbounds from potential investors flood in after a serious dislocation.

"Clients always worry when there are unexpected events and market moves. The question is always — has it hurt our portfolio? — fortunately, the answer is no. We're right-sized and we've got hedges in place. We've also been taking advantage of the volatility to add to positions," wrote Sir Michael Hintze, founder and CIO of $18 billion fund CQS, in an email to Business Insider.

Source link
Read also:
Business Insider › Finance › 1 week ago
Hedge funds are not always known for their transparency, even with their own investors, but side industries have popped up offering investors hedge fund-like strategies in a more open wrapper. Some asset managers are pinning their hopes on growth in...
Business Insider › Finance › 3 days ago
Hedge fund performance has bounced back this year after a disastrous end to 2018, but institutional investors are still dropping them from their portfolios in favor of private equity, according to a study by EY. The "lackluster demand" for hedge funds...
Business Insider › Finance › 2 months ago
Hedge funds that specialize in bearish or short bets and quant funds may have gotten crushed after the price of crude oil spiked as much as 20% Monday, a fund manager in London told Business Insider. It's the second such shock for funds, after last...
The Sun › 3 weeks ago
A MUM is desperate to find a mystery hero who saved her toddler’s life at a fruit farm. The man came to the rescue of 21-month-old Freya Fernie when she started choking on a strawberry and her face turned purple. He turned the tot upside down and...
Business Insider › Finance › 1 month ago
Lime Asset Management — South Korea's largest hedge fund — has frozen a total of $710 million in withdrawals as investors rush to pull their cash from the firm, Bloomberg reported. The firm, which oversees about $4.1 billion, said it's struggling...
Business Insider › Finance › 1 month ago
While the bankruptcy of British tour operator Thomas Cook has left hundreds of thousands of travelers stranded, a group of hedge funds are poised to make as much as $250 million from the company's collapse. Funds including Sona Asset Management and...
Business Insider › Finance › 1 month ago
Funds including Melqart, TT International, Whitebox Advisors and Silver Point built up short bets against Thomas Cook, likely profiting handsomely when the tour operator collapsed this week. "A number of hedge funds seem to have been betting on zero...
Business Insider › Finance › 1 month ago
Grayscale Investments, which runs ten crypto-linked investment trusts, had more than a quarter of a billion dollars-worth of inflows in the third quarter, with an overwhelming majority coming from hedge funds. Crypto and crypto-linked products were hit...
The Sun › Lifestyle › 3 days ago
ANGELINA Jolie is said to have “bitter feelings” towards her ex Brad Pitt and claims “he turned their kids lives upside down”. A source has told UsWeekly that the actress is not friends with her estranged husband because she still holds...
Business Insider › Finance › 1 month ago
Pacific Gas & Electric, the bankrupt California utility that's been found partially responsible for causing two of the state's devastating wildfires, has been a target for dozens of hedge funds. In a bankruptcy hearing on Monday, a judge will decide...
Sign In

Sign in to follow sources and tags you love, and get personalized stories.

Continue with Google