Monday, July 15, 2024

Hedge funds beat soaring equity markets

Hedge funds have outperformed rising equity markets on a risk-adjusted basis over the past 12 months, an early signal of their renewed alpha proposition in the post-pandemic era of higher rates.

PivotalPath’s main Composite Index has generated positive alpha of 3.4% versus the S&P 500 in the year to the end of February, a period which saw a big equity market comeback.

Hedge funds have been delivering alpha versus benchmarks adjusted for risk in what is widely seen to be a stock-pickers market. Industry sources say a number of highly concentrated and directional stock picking funds are already enjoying double digit returns returns in 2024.

Managed futures and credit were the top performing hedge fund strategies in that period, according to the US research firm.

“Investors and managers are increasingly aligned on opportunities in credit, with 2024 expected to see a period of out performance for opportunistic credit specialists, as well as an increase in allocations to credit funds.”

CTAs are on the up in 2024 after a flattish 2023.

“Managed futures benefited from US Treasuries selling off (rates move inversely to prices) significantly in February,” reported PivotalPath. Rising stock market trends also helped.

Hedge funds overall averaged a 2.1% rise in February, putting them up 3.2% for the year.

Their alpha relative to stock markets is a positive sign in contrast to the post-2008 era of zero rates and rising markets, against which hedge funds were perceived to have under-performed.

PivotalPath tracks over 2,500 institutionally-relevant hedge funds, spanning more than $3trn of industry assets.