Hedge Fund Data
The (un) balanced portfolio – were hedge funds there to protect investors in September?
In October last year, Kevin Gundle, Aurum Research Limited’s CEO, warned investors of the risks of relying on the traditional 60/40 portfolio whether adding alternatives – specifically hedge funds – to their portfolios might protect them.
You can read Kevin’s original piece here.
A typical 60/40 portfolio (containing US equities and government bonds) fell sharply in September after losses in the two major asset classes. Recent headlines like ‘Traditional 60/40 portfolio has actually reached its expiration date’ and ‘Investors suffer 60/40 blues as investment mainstay takes a hit’ illustrate the risks Kevin warned about.
Indeed, many hedge fund investors in multi-strategy, macro and arbitrage strategies are likely to have been protected from the worst of September’s volatile markets. However, when it comes to hedge fund investing, investors need to choose both strategies and managers with great care and due diligence.
At Aurum, we often highlight industry performance dispersion, and we know that the impact of strategy and manager selection is key. This was evidenced clearly in September, as investors in more beta-driven strategies, such as long biased, were left licking their wounds when the beta came back to bite in a month of equity market volatility.
Understanding the beta element of hedge fund strategy returns is as important for investors as dispersion. The charts below illustrate that strategies with higher long-term beta performed significantly worse in September.
When it comes to hedge fund investing there are no short cuts. Significant investment and operational due diligence work is required to achieve an optimal outcome when it comes to hedge fund selection.
Data from the Aurum Hedge Fund Data Engine is provided on the following basis: (1) Aurum Hedge Fund Data Engine data is provided for informational purposes only; (2) information and data included in the Aurum Hedge Fund Data Engine are obtained from various third party sources including Aurum’s own research, regulatory filings, public registers and other data providers and are provided on an “as is” basis; (3) Aurum does not perform any audit or verify the information provided by third parties; (4) Aurum is not responsible for and does not warrant the correctness, accuracy, or reliability of the data in the Aurum Hedge Fund Data Engine; (5) any constituents and data points in the Aurum Hedge Fund Data Engine may be removed at any time; (6) the completeness of the data may vary in the Aurum Hedge Fund Data Engine; (7) Aurum does not warrant that the data in the Aurum Hedge Fund Data Engine will be free from any errors, omissions or inaccuracies; (8) the information in the Aurum Hedge Fund Data Engine does not constitute an offer or a recommendation to buy or sell any security or financial product or vehicle whatsoever or any type of tax or investment advice or recommendation; (9) past performance is no indication of future results; and (10) Aurum reserves the right to change its Aurum Hedge Fund Data Engine methodology at any time and may elect to suppress or change underlying data should it be considered optimal for representation and/or accuracy.
The S&P Global BMI (the “S&P Index”) is a product of S&P Dow Jones Indices LLC, its affiliates and/or their licensors and has been licensed for use by Aurum Research Limited. Copyright © 2021 S&P Dow Jones Indices LLC, its affiliates and/or their licensors. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
By accepting delivery of this Paper, the reader: (a) agrees it will not extract any index values from the Paper nor will it store, reproduce or further distribute the index values to any third party for any purpose in any format or by any means except that reader may store the Paper for its personal, non-commercial use; (b) acknowledges and agrees that S&P own the S&P Index, the associated index values and all intellectual property therein and (c) S&P disclaims any and all warranties and representations with respect to the S&P Index.
This Post represents the views of the author and their own economic research and analysis. These views do not necessarily reflect the views of Aurum Fund Management Ltd. This Post does not constitute an offer to sell or a solicitation of an offer to buy or an endorsement of any interest in an Aurum Fund or any other fund, or an endorsement for any particular trade, trading strategy or market.
This Post is directed at persons having professional experience in matters relating to investments in unregulated collective investment schemes, and should only be used by such persons or investment professionals. Hedge Funds may employ trading methods which risk substantial or complete loss of any amounts invested. The value of your investment and the income you get may go down as well as up. Any performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable indicator of future results. Returns may also increase or decrease as a result of currency fluctuations. An investment such as those described in this Post should be regarded as speculative and should not be used as a complete investment programme.
This Post is for informational purposes only and not to be relied upon as investment, legal, tax, or financial advice. Whilst the information contained in this Post (including any expression of opinion or forecast) has been obtained from, or is based on, sources believed by Aurum to be reliable, it is not guaranteed as to its accuracy or completeness. This Post is current only at the date it was first published and may no longer be true or complete when viewed by the reader. This Post is provided without obligation on the part of Aurum and its associated companies and on the understanding that any persons who acting upon it or changes their investment position in reliance on it does so entirely at their own risk. In no event will Aurum or any of its associated companies be liable to any person for any direct, indirect, special or consequential damages arising out of any use or reliance on this Post, even if Aurum is expressly advised of the possibility or likelihood of such damages.
You may also like
Arbitrage deep dive – Oct 22
The period under review includes ‘the worst cross asset selloff since 1981’ with simultaneous declines across equities, commodities, corporate and…
Monthly hedge fund performance review – October 2022
Hedge fund performance was largely positive in October. Strategies with a higher beta to equities outperformed other strategies, as most equity markets…
Macro deep dive – Sep 22
Macro funds generated an average return of 2.2% in the 12 months through September 2022. Strategy AUM has fallen by $11.1bn, due to net outflows of $16.3bn…
Aurum’s quarterly review – Q3 2022
All of Aurum’s managed funds and bespoke accounts delivered positive returns in the third quarter of 2022. Performance for Aurum’s commingled fund…
Monthly hedge fund performance review – September 2022
Hedge fund performance was mixed in September, whilst equities and bonds sold off, particularly in the latter part of the month. Hedge fund performance…
Quant deep dive – Aug 22
Quant funds generated an average return of 12.8% in the 12 months to August 2022 Strategy AUM has grown by $42.8bn, net profits contributed $47.8bn of…
Monthly hedge fund performance review – August 2022
Hedge fund performance was largely positive in August, whilst equities and bonds sold off, particularly in the latter part of the month. Hedge fund performance…
Monthly hedge fund performance review – July 2022
Hedge fund performance was generally positive in July, albeit with some exceptions, with narrower dispersion than in June. Strategies with a higher beta…
Does structure matter? Hedge funds v alternative UCITS – H1 2022 update
Earlier this year we wrote about the growing performance gap that has emerged between hedge funds and their alternative UCITS (“alt UCITS”) counterparts…
Hedge fund industry deep dive – H1 22
Hedge fund performance was down 4.0% YTD. H1 2022 has been an extraordinarily challenging time period, not only for financial markets, but also for the…
Aurum’s quarterly review – Q2 2022
All of Aurum’s managed funds and bespoke accounts delivered positive returns in the second quarter of 2022. Performance for Aurum’s commingled fund…