While there have unquestionably been some negative yields indicating poor hedge fund performance, the word on the street is that some of this is, “misleading.” According to Legal & General Investment Management head of asset allocation, Emiel van den Heiligenberg: “There are ways of making money from it.”
The question is, how? Outside of Europe, hedge fund managers can purchase Europe’s negative-yielding government debt. These funds are based on relative short term interest rate levels which are way higher in America than in the Eurozone. As such, dollar-based investors are indirectly paid to ensure options are available for their euros to be transformed back to dollars.
It was also noted by HedgeWeek that there is continued performance growth in the second half of 2019. July ended with a 7.68 per cent year-to-date return and positive returns in six of the past seven months. According to BarclayHedge president, Sol Waksman:
“Anticipation of the first interest rate cut by the Fed in more than ten years propelled the S&P 500 and the Nasdaq to all-time highs in July. Concerns over the economic implications of a no-deal Brexit and slowing growth in Europe helped push German 10-year bond yields to new lows. The equity and interest rate sectors provided enough of a tailwind for a positive month.”