Cliff Asness Says Factor Investing Has Not Performed Well (Bloomberg)
Cliff Asness, the chief investment officer of AQR Capital Management LLC, says his trademark factor investing strategies have been disappointing. Asness, who spoke Thursday at Morningstar Inc.’s investment conference in Chicago, is coming off a tough year in 2018 when most of its funds declined. His firm also recently reduced its headcount and has been bleeding assets. “Quant stock selection has been terrible,” said Asness, whose strategies use factors like value and momentum when selecting equities. Investors pulled more than $1 billion from AQR funds in the first three months of 2019, following withdrawals of $8.1 billion in 2018, according to estimates by Morningstar.
Hedge Fund Billionaire Ray Dalio to Younger Self: ‘Why Are You So Stupidly Arrogant!?!’ (CNBC)
Today, at 69 years old, Ray Dalio is widely admired and famous for being the founder of the largest hedge fund in the world, Bridgewater Associates, which manages $160 billion. But things could have turned out very differently because of a mistake Dalio made when he was a young entrepreneur. During a Reddit “ask me anything” on Tuesday, Dalio, who is now worth more than $18 billion, was asked what he might tell his younger self. “The big message I would want to have given myself is ‘Why are you so stupidly arrogant!?!'” Dalio wrote on Reddit. That’s because in 1982 when Dalio was 33, he almost ran Bridgewater into the ground.
U.S. Recession Would Spur ‘Massive’ Corporate Bond Losses, Eisman Says (Bloomberg)
The U.S. corporate debt market will suffer “massive losses” if the world’s biggest economy falls into recession, said Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis. While the U.S. financial system is strong, “that doesn’t mean we won’t have a recession,” Eisman said in a Bloomberg Television interview in Hong Kong on Thursday. “And in a recession I think there will be massive losses in the bond markets because there’s a lack of liquidity.”
Viking, Coatue Post Gains as Rising Stocks Boost Hedge Funds (Bloomberg)
Equity hedge funds including Philippe Laffont’s Coatue Management and Andreas Halvorsen’s Viking Global Investors are making money in 2019, boosted by a strong stock market. Coatue’s flagship hedge fund returned 3.7% last month and 12% this year through April. Laffont’s firm, which focuses on investing in technology, media and telecommunications stocks, managed about $16 billion as of Dec. 31.
Hedge-Fund Investors are Getting Excited about the Possibilities of Machine Learning. There’s a Good Chance They Don’t Understand It (Business Insider)
One of the hedge fund industry’s machine-learning pioneers remembers the days – just “three years ago” – when explaining his fund had to be done in the simplest of terms. Now, with more than half of hedge funds using some form of machine learning or artificial intelligence in their investment processes, according to a BarclayHedge report, the “pendulum has almost swung the other way,” says Michael Kharitonov, co-founder of $4 billion Voleon Capital.
Eurekahedge Hedge Fund Index up 1.13% in April (5.22% YTD) (Opalesque.com)
The Eurekahedge Hedge Fund Index was up 1.13%in April, supported by the global equities which advanced on encouraging economic data and accommodative central bank policies. According to Eurekahedge, positive earnings surprises helped renew investors’ optimism in the global equity market, which rallied 3.38% during the month as represented by the MSCI ACWI (Local). Returns were positive across geographic mandates, with hedge fund managers focusing on North America leading the pack as they gained 1.37% in April. Asian hedge funds trailed behind their peers focusing on other regions, but still managed to generate positive returns. Looking at strategic mandates, equity long-biased hedge fund managers were best positioned to benefit from the equity market performance during the month, and ended the month up 2.78%.
Hedge Funds Target European Loans as Downturn Looms (Reuters)
LONDON, May 9 (LPC) – A number of companies financed in Europe’s leveraged debt markets have attracted the attention of global hedge funds, which are lining up money in preparation to profit when the impending downturn hits. Syndicated loans in struggling companies have lost up to a quarter of their value within a six week period since the end of the first quarter and as much as half their loan value since the end of the third quarter in 2018, according to LPC data. This has attracted the attention of hedge funds that are buying small portions of the debt in order to gain access to information on the private companies.
Hedge Funds See Fourth Consecutive Month of Positive Returns in April (HedgeWeek.com)
Hedge funds gained an average of 1.26 per cent in April, the fourth consecutive month of positive returns, following a five-month string of aggregate declines closing out 2018, according to the latest eVestment April 2019 hedge fund performance data. Year to date (YTD) 2019 industry average gains of 6.52 per cent lag a global balanced benchmark but represent the industry’s best first four months since 2006, when aggregate gains were 7.62 per cent.