What type of hedge funds do you see succeeding in the future?

Question

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 we can all agree quants will be very successful, but what about macro, distressed, event-driven, emerging markets etc.?

exlurker · Accepted Answer

As millennials transition into homeowners, we will see a growing demand for home privacy (afterall, millenials make up the largest group of early adopters for home automation and security technologies). That said, most in-demand neighbourhoods are rather dense, making it difficult for millennial home-owners to rely solely on technology to create privacy.

What many industry experts posit is that the domestic wall market (think high, metal walls/gates build around your house) is poised for rapid growth after year 2020.

zerojb34 · Answer

Exactly....Nothing more impressive than massive, high conviction trades. forget this sprinkling of 80 equity names across your book, that's not hedging.

great quote by Hugh Hendry (one of the greatest macro minds around).

"in April/May 2007 – Hendry said he was way out of the money before before generating 50% in October 2008.

"Now again, with the mastery and the art of macro, it is so complex that it's not just necessary that you're correct; it is the consequences of being correct. Now, we had a position whereby the other side - the investment banks - they were desperate.

thefinancekid · Answer

Generally, fundamental l/s funds haven't been doing too well. Though, activist investing still is booming and it should be that way. With growing passive investments and quants that rely less on fundamental analysis, corporate management and boards are bound to become disillusioned with their goal of being accountable to shareholders and best increasing shareholder value - i mean that's the whole point of a company, private or public.

Southern Gent · Answer

Im interested to see how well passive holds up when the market turns. What will happen when people have questions about losses and how its going to be mitigated?

Hedge fund strategies and subsequent success are based on the ability to action their strategy. They tend to do better at mitigating risk and some are more comfortable dealing with uncertainty. Many will catch back up when the market turns.

There are certainly outliers but Im not sure why you think on balance quants will be successful- its a pretty sweeping statement and I doubt "we can all agree".

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What type of hedge funds do you see succeeding in the future?

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