almost 4 years ago • 2 mins
Some of the world’s most prominent hedge fund managers had their worst month ever in March, it emerged on Friday – and a spike in investor withdrawals has left Man Group, the biggest such publicly listed firm, entering survival mode 😫
Hedge funds buy and short a wide variety of individual investments. Such selective strategies can allow them to profit when the wider market tanks – although it’s tough to make extraordinary gains when markets are rising.
Stock-picking funds had their best year in a decade in 2019, even if they returned just half the rise of the US S&P 500. But while a handful also managed to turn recent market volatility to their (and their investors’) advantage, three quarters of hedge funds lost money last month.
Bridgewater Associates, for example, saw its flagship fund lose 16% in March – and things weren’t much better at UK-based Man Group. While some strategies made gains, others declined 30% as investors pulled cash from funds whose value was already shrinking 😭
After years of significantly underperforming a booming US stock market, investors will be questioning the $3 trillion hedge fund industry’s ability to justify high fees through the promise of returns when things head south.
Still, investment managers of all descriptions have suffered client withdrawals recently – and Man Group's closure of several smaller funds could be a good thing if it lets the firm focus on its successful algorithm-based strategies. Investors in Man Group’s own shares (which form part of the UK FTSE 250index) accordingly sent their value up 4% on Friday.
And with Brevan Howard Asset Management’smain fund – also available, albeit indirectly, to average investors – posting its best month ever in March (it rose 18%), hedge funds are unlikely to disappear anytime soon 🌝
PS: check out our Packs on Bill Ackman and Ray Dalio to learn more about how two of the industry’s titans invest.
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