Topic Tags: Hedge Funds

Alternatives 101 Video Series

Our Alternatives 101 video series covers each of the major alternatives asset classes, with guidance provided by several of Marquette’s research analysts and directors. In contrast to traditional investments, alternatives investing includes asset classes other than stocks, bonds, and cash (reference our Investing 101 series for more information about traditional investing concepts). This series aims to introduce trustees, staff, and other investors to the key terms and concepts they may encounter when investing in these typically less familiar asset classes.

The series covers:

View each talk in the player below— use the upper-right list icon to access a specific presentation.

For more information, questions, or feedback, please send us an email.

Will Argentina’s New President Drive Losses for Hedge Funds?

When Argentina President Mauricio Macri was elected in 2015, he brought along a pro-business agenda, which reopened the country’s financial markets bringing investors ­— including hedge funds — back into the country. As hedge funds returned, their investments in both debt and equity were on the presumption that Argentina would not default on its debt, and economic growth would strengthen. Unfortunately, those bets were hit hard following a disappointing showing for Macri in August’s primary election. Bonds across the Argentina complex sold off to distressed levels as investors expressed concerns that Alberto Fernández, the Peronist candidate, would return the Peronist movement back to power. Investors feared market overhauls made by Macri would be undone by Fernández and the Peronist party.

On October 27th, the Peronist movement was voted back into power when Fernández received 48% of the vote. Despite the election result, hedge funds remain invested across the Argentina debt complex with the view that Fernández will not allow Argentina’s bonds to default. It remains to be seen if that will happen, but hedge funds remain long on this distressed credit despite taking a large haircut to their positions in August. These managers have quite the hole to climb out of and only time will tell if they are on the right side of this trade; for those with exposure, all eyes will be on Fernandez and any new policies that arise from his regime that could impact these investments.

Print PDF > Will Argentina’s New President Drive Losses for Hedge Funds?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Third Quarter Review of Asset Allocation: Risks and Opportunities

The third quarter saw mixed results for financial markets. Economic fundamentals generally remain strong but signs of deterioration are starting to emerge. Unemployment currently hovers around 3.5%, and inflation is near the Fed’s target of 2%. However, 3Q GDP growth was under 2% (though the 1.9% figure exceeded the 1.7% estimate), and the PMI index has been below 50 since August (a reading under 50 is indicative of contraction in the manufacturing sector). Overall, the most important global trends we see are the following:

  • The U.S.-China trade conflict continues to weigh heavily on both countries as talks remain ongoing;
  • The Federal Reserve (“Fed”) reversed course by cutting interest rates and further cuts are still possible;
  • The U.S. Treasury yield curve inverted briefly, which historically has signaled a recession over the subsequent 12–24 months;
  • Brexit negotiations were extended to January 31, 2020, therefore further perpetuating the uncertainty around the UK’s exit from the EU;
  • Negative interest rates continue to grow in prevalence around the world.

The impact of these shifting dynamics is explored further in this newsletter as we review third quarter performance and expectations going forward for each of the major asset classes.

Read > Third Quarter Review of Asset Allocation: Risks and Opportunities

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

3Q 2019 Market Briefing

Live Webinar – Thursday, October 24, 2019 – 1:00-2:00 PM CT


Please join Marquette’s asset class analysts for a live webinar based on our 3Q 2019 Market Environment. This webinar series is designed to brief clients on the market as soon as possible after quarterly market data becomes available.

The overall U.S. economy will be discussed, along with fixed income, U.S./non-U.S. equity, hedge funds, private equity, real estate and infrastructure.

Featuring:
Greg Leonberger, FSA, EA, MAAA, Partner, Director of Research
Jeffrey Hoffmeyer, CFA, Lead Analyst, Asset Allocation
Ben Mohr, CFA, Director of Fixed Income
Samantha Grant, CFA, CAIA, Senior Research Analyst, U.S. Equities
David Hernandez, CFA, Senior Research Analyst, Non-U.S. Equities
Joe McGuane, CFA, Senior Research Analyst, Alternatives
Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets
Brett Graffy, CAIA, Research Analyst

Who should attend: Institutional investment stewards, private clients, investment managers

Live webinar attendees will be able to submit questions to the presenters and vote in audience polls during the event. Questions will be answered during the final 15 minutes of the webinar, as time allows.

If you are unable to attend the webinar live, you can also view it afterward on demand. Registrants will automatically receive a follow-up email shortly after the end of the webinar to notify them of webinar recording availability

Second Quarter Review of Asset Allocation: Risks and Opportunities

Overall, the second quarter was positive for financial markets, thanks to strong economic fundamentals and expected Fed stimulus. Unemployment remains low at 3.7% and inflation (1.8% year over year) is near the Fed’s long-term target of 2%. However, there are increasing concerns about a global economic slowdown and early forecasts for 2Q GDP growth are around 1.5%, far lower than what we’ve seen in recent quarters. Globally, the most important trends we see are the following:

  • The U.S.-China trade conflict remains ongoing as talks between the two countries resumed, but little progress has been made;
  • The Federal Reserve is expected to cut rates in July and markets are forecasting another one to two cuts by the end of the year;
  • Business sentiment is declining ­— most notably in the PMI manufacturing index, which is now dangerously close to falling below its growth threshold;
  • Britain continues to struggle with its Brexit and elected a new PM (Boris Johnson) on July 23rd;
  • China and Europe are expected in increase their stimulus measures to combat slow growth and overall global uncertainty;
  • Late-cycle dynamics in credit and equity markets.

The impact of these trends is explored further in this newsletter as we review second-quarter performance and expectations going forward for each of the major asset classes.

Read > Second Quarter Review of Asset Allocation: Risks and Opportunities

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Hedge Fund Favorites Rebound to Start 2019

This week’s chart shows the performance of Goldman’s portfolio of hedge fund favorites, which draws from over 800 fundamental-driven hedge funds’ top 10 long equity holdings. This hedge fund index is constructed with approximately 50 holdings commonly held in the top 10 by fundamental hedge funds.

In the fourth quarter of 2018, top hedge fund holdings gave back all their first half gains and underperformed the S&P 500 for the year. These popular holdings were positively correlated with growth and momentum factors. They were also heavily weighted toward the technology sector which helped them outperform during the first half of 2018.

As the calendar flipped to 2019, hedge fund performance has rebounded strongly, finishing the quarter with the strongest performance since 2006. Sector weights to information technology, communication services, and consumer discretionary drove outperformance from the most widely held hedge fund names. This strong start to 2019 was much needed for hedge funds, as 2018 returns failed to meet investor expectations. Of course, this represents only one quarter of the year and investors will be following hedge fund performance closely for the remainder of 2019 to see if this pattern continues.

Print PDF > Hedge Fund Favorites Rebound to Start 2019

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

First Quarter Review of Asset Allocation

Heading into 2019, the primary risks facing financial markets were the trade war with China, the U.S. government shutdown, Brexit uncertainty, and further Fed rate hikes. However, in the first quarter the majority of these worries subsided.

In this newsletter, we analyze the current market environment with a review of recent performance and future expectations for each major asset class. As always, we caution investors to stay diversified and rebalance as appropriate. There are always potential disruptors to the financial markets and the most powerful tend to be largely unexpected. We will continue to monitor markets and developments as they occur to guide our clients to the most optimal portfolio decisions given the backdrop of program goals and risk tolerance.

Read > First Quarter Review of Asset Allocation

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Can the PG&E Bankruptcy Create Profits for Hedge Funds?

This week’s chart of the week examines the price performance of Pacific Gas and Electric (“PG&E”) Corporation’s public debt and equity. Because of what they provide, publicly traded utilities have long been considered defensive investments due to their relative stability throughout economic cycles.

In the third quarter of 2018 hedge funds began buying shares of this California public utility on the view that PG&E’s liability for 2017 wildfires would be much lower than expected. This buying took place ahead of the deadliest wildfire in California history which many blamed on PG&E electrical lines.  PG&E’s exposure to wildfire liabilities is heightened by the state’s inverse condemnation, a legal standard which holds utilities responsible for all damages caused by their equipment. On January 29th PG&E filed for bankruptcy related to the more than $30 billion in liabilities it faces related to California wildfires in 2017 and 2018.

Many hedge funds that bought both debt and equity of PG&E in the third quarter of last year have seen the equity and debt sell-off over 60% and 18% respectively through January. This price drop has caused some managers to exit their positions. With the company announcing a bankruptcy filing, distressed hedge funds have stepped in to buy up both the equity and debt of the company.  Their rationale for doing so is that the payout of the liabilities will be smaller than originally expected and thus both equity and debt prices can recover enough to deliver a profit relative to the currently depressed prices.

Print PDF > Can the PG&E Bankruptcy Create Profits for Hedge Funds?

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

2019 Market Preview

Coming off a difficult 2018, investors face a litany of questions going into this year, whose potential answers will undoubtedly have an impact on the capital markets. The following set of newsletters examines the primary asset classes we cover for our clients, with in-depth analysis of last year’s performance and more importantly, trends, themes, and projections to watch for in 2019. We hope these materials can assist you and your committees as you plan for the coming year, and please feel free to reach out to any of us should you have further questions about the articles or wish to review the 2019 Market Preview Webinar recording. Here’s to a better year from the capital markets in 2019!

U.S. Economy: The View from the Top?
by Jeffrey Hoffmeyer, CFA, Lead Analyst, Asset Allocation

Fixed Income: Kicking Off the Year with Moderate Valuations, a Less-Hawkish Fed and Growing Global Tariffs
by Ben Mohr, CFA, Senior Research Analyst, Fixed Income

U.S. Equities: The Pro-Growth Narrative Fizzles Out
by Samantha T. Grant, CFA, CAIA, Senior Research Analyst, U.S. Equities
and Rob Britenbach, CIPM, Research Analyst, U.S. Equities

Non-U.S. Equities: Can They Get Back on Track?
by David Hernandez, CFA, Senior Research Analyst, International Equities
and Nicole Johnson-Barnes, Research Analyst

Real Estate: Navigating Through a Late Market Cycle
by Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets

Infrastructure: Stable Cash Flows in an Uncertain Market Environment and the Evolving Landscape
by Jeremy Zirin, CAIA, Senior Research Analyst, Real Assets

Hedge Funds: Is Market Volatility Here to Stay?
by Joe McGuane, CFA, Senior Research Analyst, Alternatives

Private Equity: Poised for Robust Deployment
by Derek Schmidt, CFA, CAIA, Senior Research Analyst, Private Equity

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

A “Halftime” Review of Asset Allocation for 2018

As of June 30th, the Russell 3000 index was up only 3.2%, a far cry from its 10-year annualized return of almost 9%; the MSCI ACWI ex-U.S. ­— a broad proxy for international stocks — has been even more disappointing, down 3.8% compared to its 2017 return of 27%. Furthermore, most bond strategies are negative for the year, thus dispelling the notion of diversification. However, the year is only halfway complete and as we have seen repeatedly in the capital markets, fortunes can change rapidly and unpredictably. In an effort to formulate explanations and expectations, the following newsletter investigates the disappointing performance from the first half of the year, as well as potential outcomes for the remainder of 2018.

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The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.