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Hedge Fund Fluctuations

Hedge funds are a very fluid industry.  As Alan Greenspan once said: “One of the problems with hedge funds is that they are changing so rapidly. If you have the balance sheet that closed business last night, by 11 A.M. this morning, that won’t tell you very much about what they’re doing.” In this article we take a look at fluctuations within two firms and one industry:  Atlas Impact Partners, Elliot Management and the oil industry.

A new hedge fund has been launched by Atlas Impact Partners.  The firm – set up last year, uses “a long-short absolute return strategy designed to capture investment opportunity at the nexus of innovation, disruption, and impact.” It has just now opened its first fund geared toward investing in firms that are focused on coming up with creative ideas for enhancement in environmental and social spheres.  At the same time, it bets against business stocks that are potentially damaging in these areas.  Company founders are: a former Generation Investment Management partner (David Lowish); former research head at Just Capital (Rob Brown); David Castricone and Richad Billing.

Now we look at a hedge fund quite the opposite to Atlas, at least in its age.  Elliot Management Corporation has been around since 1977.  After a year of talks it has now acquired Barnes & Noble for a price of approximately $638 million.  Last year the hedge fund also bought Waterstones.

Between Brent, NYMEX, ICE West Texas Intermediate, US gasoline and US heating oil, 122 million barrels have been sold in the week ending May 28.  This marked the largest amount of barrels sold in the timeframe since October 2018.

Hedge Funds: Current Trends

Trading trends

There are various fluctuations among the hedge fund industry vis-à-vis trends in their investment.  These are often not publicized but we do get some clue as to swings and inclinations via SEC quarterly documentation.  Recent SEC 13F forms show the following:

  1. An increase in S&P 500 of 15 percent in the first quarter; an average return for equity hedge funds of 8% in the first quarter.
  2. Q1 2019: a drop of net exposure by 4%
  3. Top 10 positions have an average of 69% in hedge fund holding.

In general, hedge fund favorites included (in alphabetical order) Alibaba Group, Alphabet, Amazon, Celgene, Facebook, Iqvia Holdings, Microsoft and Worldpay.  Favorites in short-interest list (in alphabetical order): AT&T, Chevron, Exxon, Mobil, Nvidia and Qualcomm.

The health industry (more specifically the biotech branch) is becoming more popular among hedge fund investors while energy, industry and materials is decreasing in its popularity.

Traders have been moving into the crypto sector over the last few years as well.  Traditionally this has been the home of those in the retail industry but there has been a definite increase in interest from institutional traders as well.

HFA Global Board of Directors

Each year the Hedge Fund Association (HFA) elects new board members.  This worldwide “not-for-profit industry trade and nonpartisan lobbying organization devoted to advancing transparency, development and trust in alternative investments” was created in 1996 and has representation in over 5 continents and 14 countries.

Earlier this month, the HFA elected the following new individuals to its board. they will all serve a three-year term:

  1. Rajpal Arulpragasam, 
  2. Suzanne Currie, 
  3. Amy Lawrence 
  4. Gary Markham

James Steadman has also been elected to be the co-director for New York and Latin America. 

Investing Tips

Before starting any project it’s often worth checking in with the experts.  People who have already done the background work; have had successes and failures; know what works and doesn’t work and are now efficiently engaged in the project upon which you are about to embark.

Here we look at quotes from people in the investment world:

“We have never shied away from making investments.  Even during downcycles we never stopped our investments.” 

-Anand Mahindra, a Harvard University graduate, Chairman of Mahindra Group (Mumbai based business conglomerate), estimated net worth of $1.55billion; featured in Fortune Magazine’s World’s 50 Greatest Leaders.

“When making an investment, the people are more important than the product.” 

-Theo Paphitis, retail magnate and entrepreneur, estimated wealth of £280 million, Boux Avenue lingerie chain founder, owner of Ryman stationery chain, owner of hardware retailer Robert Dyas.  

Of the latter investment, Paphitis said:

 “It is a business which fits well with my investment criteria.“I’m not emotional about investments.  Investing is something where you have to be purely rational and not let emotion affect your decision making – just the facts.”

-Bill Ackman, hedge fund manager and investor.

“In investing, we intuitively think we should make a number of small bets.  A blockbuster strategy is the opposite. It means making fewer huge investments. But it turns out to be safer.

-Anita Elberse, Harvard Business School business administration professor.

Take heed.  Read and listen a lot.  And then start investing…conservatively.

Good News for Hedge Funds in Recent Surge

Figures from hedge funds are looking good for the first quarter of 2019.  According to Hedge Fund Research president Kenneth Heinz, acute gains were posted from hedge fund capital “as investor risk tolerance increased.” This figure – 5.7 percent gain – marks the strongest Q1 numbers hedge funds have had in 13 years.

An increase to $3.18 trillion in hedge fund capital marked the fifth-highest level with losses offset by close to $97 billion in performance-based gains.  Plus Heinz believes:

“It is likely that the hedge fund capital and flow cycle lags realized performance by several quarters as investors evaluate new allocations in light of recent performance.  We expect this process to contribute to continued asset growth and new investor allocations throughout 2019.”

On the whole, total hedge fund capital recorded the fifth-highest level, increasing to $3.18 trillion. While hedge funds did see investor outflows of about $18 billion, the losses were offset by the performance-based gains of nearly $97 billion, HFR said.

US Markets, Jobs, Economy

markets

How is the US faring right now vis-à-vis markets, jobs and the overall economy? Unfortunately the anticipated increase in private payrolls by Dow Jones was not met (173,000 being the expectation; 129,000 the result).  According to Moody’s Analytics Chief Economist Mark Zandi:

“The job market is weakening, with employment gains slowing significantly across most industries and company sizes. Businesses are hiring cautiously as the economy is struggling with fading fiscal stimulus, the trade uncertainty, and the lagged impact of Fed tightening. If employment growth weakens much further, unemployment will begin to rise.”

The only gain that did transpire was through services, which encountered an increase of 135,000.  Looking at education and health services was encouraging as there was a hike of 56,000 and professional/business services jumped by 41,000.  Other increases occurred with: hospitality, IT, leisure, trade, transportation and utilities.

The Fed is claiming its lengthened low interest rate policy can be linked to higher salaries, full employment and stronger bargaining power.  It also seems that those most affected positively were the more underserved groups including women and blacks.

Earlier this year, Barclays Chief US Economist Michael Gapen explained:

“The labor market is as strong as it’s been since pre-crisis times. The basic fundamentals of the economy are still solid. Therefore markets should expect the Fed’s policy rate to still go higher. How many more times, and when, is debatable, but this is not a report that tells the Fed they should just be on pause forever.”

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Hedge Fund Managers and Global Growth

Hedge fund managers are (rightly) concerned about global growth.  According to Hayman Capital CIO Kyle Bass it seems like South East Asia is headed for a recession this year; Europe also but the US with its fiscal impulse from tax stimulus will wear off toward the end of the year.  We have to realize that the US won’t be exempt from a worldwide recession.

US Citizens: Measuring Quality of Life

There are many ways to measure the success of a country.  One way is to look at quality of life.  According to a recent article, this has actually improved in America quite significantly over the last two years.  While it cannot be denied that there is a lot of anti-Trump sentiment in America, the statistics – as he announced in his state of the union address – speak for themselves:

“We have created 5.3 million new jobs and, importantly, added 600,000 new manufacturing jobs.  Wages are rising at the fastest pace in decades … . Unemployment has reached the lowest rate in half a century. African-American, Hispanic-American and Asian-American unemployment have all reached their lowest levels ever recorded. Unemployment for Americans with disabilities has also reached an all-time low.”

That has to attest to an enhanced quality of life.  But if it doesn’t, then the IBD/TIPP Quality of Life Index solidifies the sentiment.  This index is based on a survey which actually asks the public how they view their quality of life and if they predict it will improve, worsen or remain stagnant over the next half year. Likewise with the  IBD/TIPP Economic Optimism Index, which has reached over 50 during this same time frame, up from its 46.8 figure under Obama.

In addition, the American Enterprise Institute (AEI) released a new national survey on the American dream. It

“found that beneath the surface of the nation’s social divisions lies a more optimistic storyline of life in America . . . [showing] that people still trust in the goodness of their communities, believe in the American dream, and prioritize family and freedom over materialism. Significant majorities in every demographic group (age, race, income, etc.) say they are satisfied with life in the community where they live and rate it good or excellent. Most percentages on these issues hover around 75 percent.”

US Power Lists

business executives

Being featured on a power list has often been a measure of success for many executives.  It is indicative of becoming credible in their fields and being recognized and respected from industry peers.  In this article we take a look at three individuals who have recently been featured on power lists throughout the nation.

First, Michellene Davis who was included on the ROI Influencers Power List 2019: Government Affairs.  This list – established by Prospect Publishing Group – has few categories including: education, finance, healthcare and law.  Davis is regarded as:

“a powerhouse in New Jersey, whether it is on politics, health care or women and POC empowerment…No one can question her natural talent. She can make calls and lobby at the local, state and federal level with ease, all thanks to her networking prowess.”

Second, Nita Lowey who was featured on The 2019 New York City Power 100 which seeks out “the people with the most influence over the city.”  As Chairwoman of the House Appropriations Committee, Lowey found a place on the list as she was deemed:

“the most powerful woman in the country, but Rep. Nita Lowey is close behind. The Westchester County Democrat is the first woman to head the House Appropriations Committee, putting her in the middle of funding battles over Planned Parenthood, safety net programs and border security. After helping avoid a second federal government shutdown, she is now on the front lines fighting the president’s emergency declaration to fund a border wall.”

Third, Nadia Boujarwah, who was included in The 2019 NYC Tech Influencers “the people driving New York tech.”  As co-founder of plus size fashion company DIA&Co, Kuwait native Boujarwah

“has been able to successfully scale the business, serving over four million customers with a team that has grown to over four-hundred employees. With Boujarwah at the helm, the company has raised a total of $90M in funding and is backed by Union Square Ventures, Sequoia Capital, Next View Ventures, and Maveron. Outside of the lucrative business, at its heart, Dia&Co is a purpose-driven company to make retail more inclusive, allowing millions to have a healthy body image through style.”

Being included in a power list is a great way to reach the next level in one’s industry.  It’s also a huge compliment to be recognized in this manner.