The return of stockpicking hedge funds
The market turbulence of the past few months has rattled many investors, but it has been a boon for at least one cohort: stockpicking hedge funds, write Costas Mourselas and Amelia Pollard.
So-called equity long-short funds, which try to buy stocks they think will do well and bet against companies they think will underperform, took in $10bn from investors in the first half of the year, according to data from Hedge Fund Research.
This trend has marked a reversal of fortunes, as the sector had suffered more than $120bn of withdrawals since 2016.
Some of the industry’s biggest names did particularly well, with Chris Hohn’s TCI and John Armitage’s Egerton among them.
“The stock picker’s market is back,” said Zlata Gleason, partner and head of client advisory at Indus Capital. “If you look at the volatility underneath, it’s like a rollercoaster. And that’s where stockpickers can really benefit.”
As one of the oldest and best known sectors of the industry, long-short hedge funds have had a tough ride in recent years and been overshadowed by giant “multi-manager” funds, which spread clients’ money over a variety of strategies.
But stockpickers have come roaring back in the face of market volatility, stoked by US President Donald Trump’s “liberation day” tariff salvo in April. The long-short strategy has been among the best performers in the hedge fund industry so far this year, returning 3.5 per cent in June and 9.2 per cent in the first half of the year, according to data from PivotalPath.
“Liberation day was a bit of a wake-up call for people,” said Charles Lemonides, the founder of hedge fund ValueWorks. “The volatility around that moment caught their attention . . . You don’t want to have just naked exposure to markets that swing that violently.”
