We had seen a 12 year bull market where it was difficult for money managers to outperform.Now things will start from bottom again .
So Which strategies tend to perform better in a bad times and whicg n good times
Which hedge funds strategies should prosper from now on ?
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vishesh9101, sorry there are no responses yet. Maybe one of these topics can point you in the right direction:
Fingers crossed that one of those helps you.
Depends on what part of the "recession" you are referring to. My experience is in macro, so I'll speak to that.
Right now, the market has accepted that we will be going into a recession, so now it's a question of 1) how bad will it be 2) how long will it last which means uncertainty and elevated volatility to stay. Anyone who was running a carry strategy in disguise (RV, basis, vol sellers, mean reversion, etc.) is feeling the pain right now, aka most "hedge" funds this entire decade. So it's not a surprise you're seeing a whole bunch of them going down right now. Anyone who is opportunistic/thematic is likely doing well (ex. Brevan and Moore - now that they have converted to family office). It's an environment where moves simply "continue" so you can trade trends which we honestly haven't had in a long time - Brevan struggled for quite a while this decade. Also anyone who runs those tail event type strategies (long vol all the time) doing well.
As for asset classes, also really depends on what part of the cycle we are in. Right now, I'd argue we are still in the "sell everything" and get liquidity/cash mode. Note that bonds and gold haven't exactly performed. Once that settles, you probably want to be long bonds / gold. Real rates will go negative and stay there for a while which is the best environment for these two assets, especially gold as the world starts to flat line and start to pick up the pieces. After that, it'll be equities no doubt. Also certain growth oriented commodities. In terms of FX, USD as a whole should sell off as the recovery stage begins.
There's been a lot of discussion about typical L/S being crowded out as more investors move towards passive investing. So, this brings the question - what strategies in the hedge fund world do you see succeeding in the future? I think quants will be successful, but what about macro, distressed, event-driven, emerging markets etc.? What I'm trying to ask is, for an ambitious future investor who wants to manage other people's money, what investment structure has the most potential in the next decade, what are the trends?
I only have a general sense of direction. I don't think there will be one particular strategy that will stand out. I think "quant" will be a baseline for anyone trying to generate alpha as in everyone will have to use some type of AI / ML in their investing strategy whether that's fundamental, passive, thematic, etc. It's too powerful of a tool and only becoming better.
A bunch of hedge funds are being wiped out right now as they were effectively just running glorified carry strategies - the field is still over-saturated right now and I think we're going to continue seeing at least half of the industry wiped out. There are very few people that can genuinely achieve alpha and the industry needs to reflect that.
Could you elaborate a little on opportunity that our rate environment is creating in the bond market? My perspective would make me hesitate on purchasing fixed income long. Reasonable coupons will be at a premium for individual bonds, Mid to long term funds will have declining income as they mature inside, and new issues would appear to present significant interest rate risk. What’s the angle I’m missing?
One thing I disagree with here, short term mean reversion should be doing well. Also, if you have enough liquidity RV will do amazing once spreads converge.
What I'm surprised by, is actually the lack of fund blow ups. There just haven't been that many considering the size of the moves and like you said, a large portion of PMs running vol selling, mean reversion strats.
look at what performed well in 2009..... once the market stabilizes in a couple of months and the prices drop hedge your portfolio by DCAing TZA..... its a 3x Russell 2000 Bear so don’t be surprised when it loses value but in the last month alone that position covered the loses in my qualified accounts; and netted me another 19% over them. in my non qual, I harvested my loses to cover my capital gains and rebalanced my portfolio Dow hit 18k ish since I believe our real support is around 18k until the turbulence calms. I had maybe 10% of my assets in TZA. I love that ticker, especially around elections... a 5k position during brexit netted me close to 80k over a day.....
also consider oil producers..... I benchmark the barrel at 40-45 so whenever it’s below I invest, non Arab oil field production is profitable at 30, off shore at 50, and hydraulic fracturing at 75ish. if you can find it buy physical wells. my friend and I have 7 wells in Kentucky that are slow pumping at a total daily yield of about 10 barrels all together and if the well is existing you can have it with a pump jack for less than 10k right now, if you have to drill a well expect 100k for the setup.. buy a slow pumper for 10k and spend another 5-7k to aciditize the shale typically you’ll get another few barrels a day out of a old rig
even at 25 a barrel we are grossing $250 daily/ net 200, so annualized net around 70k for our 90k original investment 3 years ago.... at that’s assuming shit oil prices.... plus it’s fun to go out to our little cabin on the patch and get drunk a few weekends a year for maintenance
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