Hedge funds and their best result in 10 years: what are they doing well?

  • In the first six months of this year, hedge funds grew 5.7%
  • They have 3,245 billion dollars in AUM
  • FlexFunds offer tools such as securitization of feeder funds for hedge funds

By Funds Society

The volatility that undermined the performance of hedge funds dissipates and in the first six months of this year they reported an increase of 5.7%, bringing the total capital of that industry to 3,245 billion dollars globally, the best result obtained after ten years for the period January-June, according to the index prepared by the firm Hedge Fund Research (HFR) disclosed in the United States.

The hedge funds recorded solid and broad-based earnings in June, with multiple and varied drivers of progress (…), he tweeted after reporting the results HFR, the provider of data and analysis on that market for investors, asset managers and service providers.

After facing difficult days on account of the volatility that hit the markets over the past year due to various external factors that ended up undermining investor confidence, hedge funds return to the load after reporting “their worst performance since 2011, ” Bloomberg reported .

As announced by the prestigious US economic environment, the hedge fund sector gained 6.4% during the first six months of the year and advanced 1.8% in June, putting several on the radar again Leading competitors who did not have a good time in 2018.

When analyzing the results, “the fund’s performance has been led by capital hedging strategies, with a yield up to 9.4% to date,” CNBC said . While clarifying that “despite the rebound of hedge funds in 2019, the S&P 500 index is still far ahead, with a return of 19%, including dividends.”

However, this does not detract from the performance of an instrument considered to be risky and enjoys great popularity in the select group of accredited investors, who through this tool seek the highest possible return through the acquisition of a broad portfolio of undervalued financial assets (long positions) and the subsequent uncovered sale of those securities that are considered overvalued (short positions).

A promising start

As soon as the year began, the hedge fund industry paved the way for what would be six bright months. Last April, HFR reported that the first quarter of 2019 had been the “strongest performance of the industry since 2006” for the first three months of the year, increasing total assets to $ 3.18 trillion worldwide of hedge funds.

At that time the president of HFR, Kenneth J Heinz , declared that “the capital of the hedge funds registered strong gains to begin in 2019 as the risk tolerance of investors increased (…) greatly reversing the decrease in assets of the previous quarter ”, in reference to the final tranche of 2018.

“The process of repositioning investors and the rebalancing between funds and strategies is a continuous process, probably extended by the dramatic and sharp reversal in performance and risk tolerance of the investor observed in the previous two quarters,” he said. Despite some objections, the prospects remain optimistic against the performance of hedge funds and the strategies of leading firms are already analyzed to identify what they are doing well.

The way of the leaders

The promoters of the “hedge funds” so far this year have managed to manage and place important bets on aspects such as “equity”, monitoring trends – which includes tracking of the phenomenon of cryptocurrency-based funds – opening to New business and technology.

The Financial Times points in an article that addresses the performance of hedge funds at the beginning of the year that the “green outbreaks of recovery are beginning to appear” for macro funds, and shows an improvement in market conditions “Since the European Central Bank finished its bond purchase program at the end of last year.”

In this sense, it highlights strategies of “several operators such as Brevan Howard and the Goldman Sachs Asset Management macro fund that“ had opted for diminishing returns (the other side of the price increase) and were able to make a profit ”.

“The bets on lower bond yields have proven to be the most profitable operation in an asset class this year (…) the gains in pounds sterling and the rebound in global stocks have also provided opportunities to earn money,” he says. the British newspaper offering the European vision of what is happening with the hedge fund strategies.

The American firm FlexFunds, as a provider of investment vehicles and asset management solutions for financial and professional institutions, is also considered a successful example of support for this effervescent industry. This company, for example, offers tools such as securitization of “feeder” funds for “hedge funds”, a mechanism that provides asset managers with quick access and broad global investors, allowing them at the same time to allocate more time to exploit returns on funds. underlying assets and raise more capital.

According to Mario Rivero , CEO of FlexFunds, “the solutions for hedge funds we offer allow securitizing a feeder fund for existing hedge funds. This solution is optimal for raising international capital for the fund. By securitizing the feeder fund, an ISIN code is obtained giving access to banking platforms through Euroclear. The end result is greater distribution. ”

To learn more about how FlexFunds helps hedge funds in their distribution, contact them at info@flexfunds.com or visit their website.