Hedge fund giant Ray Dalio admitted earlier this year that he and his team Bridgewater federation "Fool" in terms of epidemics. The best thing they can do is go straight through coronavirusTriggered market turmoil.
"It's wrong to flop ourselves by overturning our response to the latest headlines," Bridgewater told investors in late February.
A month later, Bridgewater's flagship hedge fund Pure Alpha hedge fund lost up to 14% in the year ending March 18, while the more aggressive fund is Down 21%. Mr Dario admits that although he was carefully cultivated as an economic fortune-teller, he was only wrong.
He told the Financial Times at the time: "We didn't know how to browse the virus, so we chose not to do it because we didn't think we had an advantage in terms of transactions." "So we kept our place, and in retrospect, we All risks should be reduced. "
The goal of the hedge fund industry is to make money in most market conditions and to protect investors' funds during periods of economic downturn. This was questioned during the 2008 financial crisis, when the average hedge fund lost 18%-significantly better than the stock market, but the decline was still large.
For the decade since, the industry has been performing poorly. The central bank's record low interest rates and years of bull market are the result of the central bank's injection of funds into the system, which facilitates cheap index-tracking funds and makes it difficult for those seeking more complex and expensive strategies to survive.
For many years, Hedge fund manager Craving for more volatility. Industry supporters predict that the new turmoil will prove its courage. Despite the grim causes of the current market chaos-and the devastating effects of the epidemic on humans and the economy-those seeking more volatility now have hope.
Initially, during the turmoil, the hedge fund industry as a whole performed well. Data from Hedge Fund Research show that, despite the market's stimulus, the average hedge fund fell by only 1.4% in February. However, as the turbulence and stability deepened, the early resilience gradually weakened, and even the previous reliable transactions were blown up. HFR said hedge funds are now down 8.6% in March and are down nearly 10% this year.
This setback occurred during a period of instability. Hedge Fund In the past 17 quarters, 13 have suffered outflows of investors' funds-the active market has helped keep the assets managed by the industry stable at around $ 300 billion, and the number of companies has shrunk for five consecutive years. Many of the remaining companies have lower profits. Disappointing returns have long led to lower fees, making the classic "2 and 20" structure, that is, 2% management fees and 20% performance fees an exception, not a rule.
So, according to investors and industry insiders, the current turmoil offers an opportunity-the last chance for many managers-to prove their worth. But many worry that it will most likely cause another 2008-style hedge fund to extinguish, especially smaller hedge funds, and will reshape it in a profound way.
"What is happening now is epic," said Mark Connors, a former hedge fund manager. He now works at Credit Suisse's main brokerage desk. "The industry will no longer be the same after that," he added, predicting that many funds will be set aside and large funds will become larger.
There have been casualties, such as Malachite Capital Management;There's some left Manikai partners Money is returning capital to investors. Since the financial crisis of 2008, many other businesses are suffering the biggest losses and are perplexed by the everyday challenges of trying to navigate the market.
A head of an American hedge fund said: "It feels like it's tied to a bulletproof jacket, and the grenades are beating every day." "It feels like I've lost some body parts."
At the same time, hedge funds are facing restrictions on their investment style in some European countries that prohibit short selling and bet on falling prices.
HOMA Capital fund manager Lionel Melka said: "You can't blame short sellers simply because some industries (or companies) have recently underperformed." "Throwing thermometers into the bins will not reduce fever."
Hedge fund strategies, performance among individual managers, and even multi-strategy funds vary widely. Most strategies have suffered at least a loss of stomach pain.
Two weeks ago, when spreads widened rather than narrowed, hedge funds trying to profit from nearly identical U.S. Treasuries or tiny differences between Treasury and Treasury futures were hit hard. A series of failures.
This strategy is popular because it generally remains stable, and as a result the company uses a lot of leverage to increase returns. But when the normal relationship breaks and all assets are sold (as it was two weeks ago), things can quickly become ugly. Fund managers said the Federal Reserve's aggressive monetary easing contained the big bleeding, but it didn't happen until some prominent figures in the industry, including Citadel and Millennium Management, were hit.
Recently, the pain of traditional long / short equity hedge funds has been worse on stocks and on stocks as well as on stocks, as well as on some computer-powered "quantitative" strategies. According to Yin Luo of Wolfe Research, last week included "hedge funds for hedging." Event-driven funds for trading Merger Also one of the victims.
Hedge funds trying to adapt to market trends are also a little disappointed. The trend-following strategy grew by 18% in 2008, but has been in trouble since then. A big investor said that if they don't prove their worth now, "there is no reason for them to survive."
On the other hand, some global macro funds betting on large economic trends have benefited more than most from recent turmoil. Investors said Brevan Howard Asset Management and Caxton Associates have made double-digit gains this year due to bets on rising bond prices.
Given the market turmoil, many investors will evaluate the allocation of their hedge funds, and the result may be more capital outflows. Simon Lack, a former hedge fund distributor at JPMorgan, became a critic of the industry, saying: "If they lose only a little less than stocks, then I think many investors will ask, what is this? significance?"