Hedge Funds Suffer March Meltdown

Hedge Funds Suffer March Meltdown

almost 4 years ago2 mins

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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 😫

What does this mean?

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.

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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 😭

Why should I care?

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.

Man Group still took in $500 million more cash from clients than they took out last quarter
Man Group still took in $500 million more cash from clients than they took out last quarter

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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