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Hedge Fund Investment in ETFs

Written by: Douglas Cumming, Pedro Monteiro Abstract This paper examines the causes and consequences of hedge fund investments in exchange traded funds (ETFs) using U.S. data from 1998 to 2018. The data indicate that transient hedge funds and quasi-indexer hedge funds are substantially more likely to invest in ETFs. Unexpected hedge fund inflows [outflows] cause a rise [reduction] in ETF investments, and the economic significance of unexpected flow is more than twice as large for transient than quasi-indexer hedge funds. Expected hedge fund flows are statistically unrelated to ETF investments on average. When ETF investment is accompanied by an increase in unexpected flow, hedge fund alphas are higher. When ETF investment is accompanied by an increase in expected flow, hedge fund alphas are lower. The data are consistent with the view that hedge fund ETF investment unrelated to unexpected flow is an agency cost of delegated portfolio management.…

New Entrants Push Global Hedge Fund Industry Over $5 Trillion Threshold Despite February Shunting

Managed Futures Funds Suddenly Back in Vogue and in the Money The hedge fund industry was unable to build much momentum on January’s net inflows. February saw broad trading losses and redemptions that collectively led to marginal net outflows of -$3.19 billion and a reduction in industry assets of -0.07%. Nevertheless, BarclayHedge’s model indicated an increase in industry AUM to $5.04 trillion—a result driven by a significant number of funds coming online in the first months of the year. However, things looked very different in managed futures funds’ corner of the world in February. CTAs swung back to net inflows with net inflows totaling +$2.93 billion, increasing industry assets by nearly a percentage point. Moreover, industry inflows were buoyed by increasing interest in all four CTA subsectors.…

The All-Weather Portfolio Approach: The Holy Grail of Portfolio Management

Written by: Youssef Louraoui Abstract This research article aims to analyze the All-Weather strategy advocated by the very famous hedge fund manager Ray Dalio. Through an analysis of nearly 10 year of market data, we have selected ETF funds to replicate the investment principle by using a classic approach. We present the different results that suggest an overall performance that converge with the original analysis proposed in the Bridgewater Associates (2009) research paper that shows the benefits of the All Weather approach on the overall portfolio risk/return trade-off.…

Hedge Funds Continue Winning Investor Favor, Raking in Another $11.29 Billion in January

January Investor Behavior Strikes Cautiously Optimistic Tone The hedge fund industry resumed attracting capital in January, scooping up $11.29 billion in new assets, good for an increase of 0.24% in total industry assets. A -$117.92 billion trading loss for the month left total industry assets at the $4.80 trillion mark as January closed. “End of year profit-taking, tax-harvesting and rebalancing in December 2021 broke an impressive nine-month run of net inflows to the hedge fund industry. Happily, January marked a return to net inflows, albeit in a somewhat more circumspect manner: Investors gave over an additional $11.29 billion to managers on the month,” observed Ben Crawford, Head of Research at BarclayHedge. “It is notable, however, that January 2022’s net inflows were less than 40% of the industry’s uptake a year ago and also well below the mean monthly inflow from 2021.”…

2021 Global Survey of the Top 50 Hedge Funds: Q4 Update

Fourth Quarter Market and Performance Update The S&P 500 soared nearly 29% in 2021, nearly half of which was generated just in the 4th quarter in spite of clear threats to growth. It was during these last 3 months of the year when the gap between the index and the Top 50 Hedge Funds drastically expanded from nearly 5% to more than 18%. While most of the 50 sustained their historical annualized returns, two basic factors drove last year’s performance gap. One: the 10 largest contributors to the S&P 500’s returns were responsible for more than one-third of the index’s total gains. Two: the reversal in fortunes suffered by a handful of veteran hedged equity and global macro managers who had a long history of consistent solid returns. This report will explore why this occurred. Note: two thirds of the 4th-quarter gains linked to the index's top contributors’ were lost during the first 7 weeks of 2022 —before Russia invaded Ukraine.…

Which Investors Drive Factor Returns?

Written by: Morad Elsaify Abstract Different investors hold different portfolios. To explain this phenomenon, I build a model in which investors have different information processing capabilities. The model predicts that highly capable investors specialize in factor timing, hold more volatile and dispersed portfolios, and reduce average risk premia and volatility. Using novel empirical measures of investors’ capabilities and information choices, I find that hedge funds are the most capable investors, while insurance companies and pension funds are the least. Variation in factor timing ability is the primary driver of these differences. Investors’ portfolios exhibit properties consistent with the model’s predictions. Using a demand system approach, I show that hedge funds have the greatest per-dollar impact on expected returns, shrinking expected returns in the factor zoo by nearly 40% per $1 trillion of invested capital.…

$39.8 Billion in December Profits Elevate Industry AUM to Record $4.80 Trillion

December Hedge Fund Outflows Merely Accentuate a Year of Spectacular Investor Interest After nine consecutive months of inflows, the hedge fund industry saw funds flow out of the sector in December with -$20.4 billion in net redemptions. December’s redemptions represented -0.44% of hedge fund industry assets. A $39.8 billion trading profit in December brought total industry assets to nearly $4.80 trillion at year end.…

Anti-Herding by Hedge Funds, Idiosyncratic Volatility and Expected Returns

Written by: Sara Ali, Ihsan Badshah, Riza Demirer Abstract Utilizing a dataset of 1,899 U.S. hedge funds, we present evidence of anti-herding behaviour among hedge fund managers in the U.S. Hedge funds anti-herd primarily based on fundamental information and irrespective of market volatility and credit deterioration conditions although funding illiquidity has a stronger effect on the formation of anti-herding behaviour across the majority of hedge fund schemes analysed. Interestingly, however, we observe a greater deal of heterogeneity across the different hedge fund categories, particularly during crisis periods, with certain hedge fund schemes including Convertible Arbitrage, Equity Market Neutral and Fixed Income Arbitrage experiencing herding driven by the COVID-19 induced market uncertainty. More importantly, we document significant economic implications of anti-herding and show that hedge funds associated with high degree of anti-herding earn significantly higher excess returns over those with low degree of anti-herding, particularly in the intermediate and long horizons up to one year. At the same time, hedge funds that anti-herd experience greater idiosyncratic volatility in subsequent periods, presenting a novel perspective to the relationship between anti-herding, idiosyncratic volatility and expected returns. While the finding of antiherding in the hedge fund industry is not unexpected as the main attraction of hedge funds is to devise proprietary trading strategies that is based on private information, our findings provide novel insight to the link between idiosyncratic volatility and expected returns in the context of anti-herding in the hedge fund industry.…

Nine Consecutive Months of Positive Net Inflows Push Hedge Fund AUM to $4.69 Trillion Mark

Global Hedge Fund Assets Reach $4.69 Trillion in November as Most Regions See Inflows The hedge fund industry extended its monthly inflow streak to nine consecutive months in November bringing in $19.3 billion in new assets. November’s inflows represented 0.41% of hedge fund industry assets. With the addition of November’s inflows, the hedge fund industry has added $199.8 billion in new assets over the nine-month period. A trading loss of nearly -$40.0 billion during the month brought total industry assets to nearly $4.69 trillion as November ended.…

Rapid Rebound from September Losses Stokes Continuing Investor Interest in Hedge Funds

$4.66 Trillion Industry Rewarded with $26.5 Billion More to Manage The hedge fund industry posted inflows for an eighth consecutive month in October, attracting $26.5 billion in new assets, equivalent to a 0.59% jump in industry assets. Over the eight-month run, Hedge Funds have packed on a total of $180.5 billion in new AUM. $44.0 billion in monthly trading profits pushed total hedge fund industry assets to more than $4.66 trillion as October ended.…

2021 Hedge Fund Survey - Q3 Update

Third quarter volatility ended up sending many trends sideways, leaving the market and the hedge fund industry flat for the period. Meanwhile, hedged equity, macro, and emerging market managers helped the Top 50 funds add nearly two full percentage points during the quarter. This select group outperformed the BarclayHedge average hedge fund return by 2.3% through the first 9 months of 2021, narrowing the amount by which it trails the market.…

2021 Hedge Fund Survey - Mid-Year Update

The 2021 hedge fund survey published in June, which ranked the 50 top-performing funds over the trailing five years through 2020, found as a group they continued to outperform their peers and kept pace with the market during the first quarter. Through the 2nd quarter, the Top 50 again outperformed the hedge fund industry, led by distressed securities and hedged equity managers. But a relentless bull market surged ahead, ignoring inflation fears, unanticipated rise in 10-year Treasury prices, a flattening yield curve, and a rising dollar--factors that weighed on fixed-income, credit and macro strategy returns.…

Investors Plow Another $18.3 billion into Hedge Funds in July Pushing Industry AUM to $4.40 Trillion

Managed Futures Funds Return to Winning Ways--Pick Up $920 million in New Capital

The hedge fund industry continued adding to assets in July with $18.3 billion in inflows. July’s inflows represented 0.4% of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions. August marked the industry’s fifth consecutive month of inflows, coming on the heels of $16.6 billion in June, $36 billion in May, $23.3 billion in April and $19.1 billion in March.…

Hedge Fund Industry’s AUM Swells to a Staggering $4.32 Trillion in June

Investors diverted an additional $16.6 billion to hedge funds in June. The month’s inflows represented 0.4% of assets and continued an inflow trend that saw $36 billion in new assets in May, $23.3 billion in April and $19.1 billion in March, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.…

Hedge Funds Eke Out a 9th Consecutive Month of Gains with a 0.07% Return in July

Emerging Markets in Asia and Latin America Hammered by Global Uncertainty

The hedge fund industry tallied its 9th straight month of gains in July with an overall return of 0.07%, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index gained 2.38% in July. For the year to date interval, the Barclay Hedge Fund Index was up 8.95% as of the close of July versus 17.99% for the S&P 500 Total Return Index.…

Growth in Hedge Fund Assets Accelerates as Net Inflows Leap Nearly 55% Month-over-Month

CTAs March on to Seventh-Straight Month of Positive Net Flows with $3.3 Billion Pickup in May

Investors poured another $36 billion into hedge funds in May, adding nearly a percentage point of growth to industry assets. May marked the third consecutive period of net inflows in what appears to be an accelerating trend. The Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions, shows $19.1 billion in net inflows in March, a 22% jump in April ($23.3 billion) followed by a nearly 55% leap in May.…

Uncertainty Begins to Cloud Brightening Economic Narrative; Barclay CTA Index Sheds -0.18% in June but Up 4.69% YTD

Rocked by Both Washington and Beijing, Crypto Rout Continues: Down Another -7.35% in June

Managed futures funds reversed course in June losing -0.18% following four consecutive months in the black, according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions. The year-to-date picture remained positive, however, with CTAs up 4.69% cumulatively through June.…

Reports of the Death of the Tech Bull-Run Exaggerated; BarclayHedge Index Compounded Return of 8.95% YTD

Every Subsector of the Hedge Fund Industry in the Black through June 2021, According to Backstop BarclayHedge

The hedge fund industry continued its winning ways in June, returning +0.88% on the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. This marks the eighth consecutive month of positive results for hedge funds. On a year-to-date basis, the Barclay Hedge Fund Index shows a compounded return of +8.99%.…

Hedge Fund Assets Grow Nearly 40% YoY After Posting $23.3 Billion in April Net Inflows

All CTA Sectors Grow YoY; Industry Assets Up Nearly 19% Since April 2020

Net Inflows of $23.3 billion in April signaled a continued vote of investor confidence in the hedge fund industry. This result represented an increase in industry AUM of .6% on the month and built momentum on the previous month’s $19.1 billion increase in hedge fund assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions. Industry trading profits exceeded $55.5 billion in April and carried the industry’s aggregate AUM figure past the $4.18 trillion mark.…

Managed Futures Funds Advance Solidly in May Despite Uneasiness Elsewhere

May Sees Crypto Assets Shed a Trillion Dollars’ Worth of Market Cap

Managed futures funds ground out another solid batch of returns this month, yielding 0.81% and making May the fourth period in a row of gains for the CTA industry. For the year-to-date interval, CTAs have earned their investors a return of 4.85% according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions.…

Hedge Funds Return 2.14%, Up 7.06% Year to Date, According to Backstop BarclayHedge

All Hedge Fund Sectors but One in the Black for the Month as Economic Indicators Suggest the Recovery Is Gaining Speed

The hedge fund industry added to its gains in April, returning 2.14% as the industry posted a sixth consecutive month in the black, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. By comparison the S&P 500 Total Return Index gained 5.34% in April.…

Hedge Funds Return 1.23% in March, Up 4.93% Year to Date, According to Backstop BarclayHedge

Encouraging Economic Indicators Fuel Equity Markets and Lead to Monthly Gains for Most Hedge Fund Sectors

The hedge fund industry continued its positive run in March returning 1.23% for a fifth consecutive month in the black, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. By comparison the S&P 500 Total Return Index gained 4.38% during the month.…

Hedge Funds Return 2.68% in February, Up 3.76% Year to Date, According to Backstop BarclayHedge

Encouraging Signs of Economic Recovery Boost Investor Confidence as Nearly All Sectors Post Monthly Gains

The hedge fund industry continued its positive run in February, returning 2.68% for the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P Total Return Index gained nearly 2.76% in February.…

Barclay CTA Index Returns 1.38% in November, According to Backstop BarclayHedge

New all-time highs in equity markets joined with uptrends in industrial metals, energy and crop markets to set the stage for a profitable month

Managed futures funds broke a two-month slump in November, posting a 1.38% return for the month, according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions. For the year-to-date, CTAs were up 2.60% through November.…

Hedge Fund Industry Returns 5.54% in November, According to Backstop BarclayHedge

Historic equity market performance, encouraging COVID-19 vaccine news help hedge fund industry to positive month after back-to-back monthly losses

The hedge fund industry reversed two consecutive months of losses in November, returning 5.54% for the month, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 10.9% for November.…

Hedge Fund Industry Loses 0.11% in October, According to Backstop BarclayHedge

Spiking COVID-19 infection rates, new government lockdowns, stalled U.S. stimulus efforts contribute to a second straight month of hedge fund losses

The hedge fund industry posted a second consecutive monthly loss in October, down 0.11% for the month, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. Once again, however, the hedge fund industry outperformed the S&P 500 Total Return Index, which was down nearly 2.66% in October.…

Hedge Fund Industry Loses 0.65% in September, According to Backstop BarclayHedge

Rising infection rates, second stimulus uncertainty and contested election concerns bring an end to a five-month run of hedge fund gains

After five straight months in the black, hedge funds posted a negative number in September losing 0.65% for the month, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. The hedge fund industry outperformed the S&P 500 Total Return Index, which was down 3.80% in September.…

Hedge Funds Post a Second Straight Month of Inflows Adding $10.5 Billion in July, According to Backstop BarclayHedge

A drop in unemployment numbers, percentage declines in Covid-19 death rates and rising equity markets buoy investors’ confidence

Hedge funds experienced a second straight month of inflows in July, bringing in $10.5 billion as the industry continued to shake off spring’s pandemic-driven redemption trend. July’s new assets built on June’s $15.1 billion in inflows.…

Hedge Fund Industry Gains 2.42% in August, According to Backstop BarclayHedge

Most hedge fund sectors benefit as a fifth consecutive month of positive equity returns fuels investor confidence

As Wall Street experienced its best August since the 1980s, the hedge fund industry posted its fifth straight positive month returning 2.42% in August, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 7.19% in August.…

Hedge Fund Industry Gains 2.76% in July, According to Backstop BarclayHedge

Stronger than expected June job numbers, hopes for additional government stimulus and vaccine optimism spur investors, driving all hedge fund sectors to a profitable July

The hedge fund industry turned in a fourth consecutive positive month in July as stock markets’ continued strong performance contributed to a 2.76% return, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 5.64% in July and closed at an all-time month-end high.…

Barclay CTA Index Loses 0.22% in June, According to Backstop BarclayHedge

As equity and energy markets continue to recover, some longer-term trend traders get caught on the wrong side of the trend.

Rebounding equity and energy markets caught some in the managed futures industry on the wrong foot in June, leading the CTA industry to a 0.22% monthly loss, according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions. Year-to-date CTAs were up 1.04% through the end of June.…

Hedge Fund Industry Gains 2.04% in June, According to Backstop BarclayHedge

As economies reopen, stock markets continue to recover pandemic losses leading almost all hedge fund sectors to a positive month

Hedge funds continued their positive ways in June, riding a continuing stock market recovery and reopening economies to a 2.04% monthly return, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 1.99% in June.…

Barclay CTA Index Gains 0.04% in May, According to Backstop BarclayHedge

As economies recover, trend reversals in key markets create difficulties in some sectors

As financial markets continued their recovery and economies began to reopen from COVID-19 pandemic shutdowns, managed futures were able to capture a small profit in May, gaining 0.04% according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions. Year-to-date CTAs gained 1.44% through the end of May.…

Hedge Fund Industry Gains 2.71% in May, According to Backstop BarclayHedge

Financial markets see positive signs in economies reopening and government stimulus helping nearly all hedge fund sectors to monthly gains

Stock markets carried April’s momentum into May and hedge funds were among the beneficiaries posting a 2.71% monthly return, according to the Barclay Hedge Fund Index, compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 4.76% in May.…

Barclay CTA Index Gains 0.12% in April, According to Backstop BarclayHedge

Managed futures continue to produce positive results even as the coronavirus pandemic causes massive economic disruptions

As the economic toll of the novel coronavirus mounted, managed futures posted another positive month in April and gained 0.12% according to the Barclay CTA Index, compiled by BarclayHedge, a division of Backstop Solutions. Year-to-date, CTAs gained 1.43% through the end of April.…

Hedge Fund Industry Gains 5.46% in April, According to Backstop BarclayHedge

Financial markets shift focus to stimulus, shake off COVID-19 damage and hedge funds post monthly gains across most sectors

U.S. stocks had their best month in decades in April and hedge funds sailed to a 5.46% return in April, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. By comparison, the S&P 500 Total Return Index was up 12.8% in April.…

Barclay CTA Index Returns 1.94% in March, According to Backstop BarclayHedge

As coronavirus disruptions create unprecedented turmoil, managed futures deliver a profitable first quarter and valuable diversification

With markets in turmoil resulting from the economic impacts of the coronavirus, managed futures made good on its diversification thesis and gained 1.94% in March according to the Barclay CTA Index compiled by BarclayHedge, a division of Backstop Solutions. Year-to-date, CTAs have gained 1.88%.…

Hedge Funds Down 8.03% in March, According to Backstop BarclayHedge

Hedge fund industry turns downward but manages to outperform equity markets as coronavirus shakes markets and economies

The hedge fund industry tracked the fates of other markets and broader economies roiled by the novel coronavirus pandemic in March, posting an 8.03% loss for the month, according to the Barclay Hedge Fund Index compiled by BarclayHedge, a division of Backstop Solutions. The hedge fund industry fared much better than the S&P Total Return Index which was down 16.2% for the month.…

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