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Insights from the senior managing director and investment committee member of $26.3 billion* global investment management firm EnTrustPermal.
2017 Investor Outlook : Clearbrook | Eagle's View Capital | EnTrustPermal | Evanston Capital | K2 Advisors | Man FRM | Morgan Creek | Morgan Stanley | Neuberger Berman | Oppenheimer Asset Management | PAAMCO | Pictet Alternative Advisors | Protege Partners | Wells Fargo
Which hedge funds will do best in 2017?
When looking at managers and hedge fund strategies, we always try and look for the ones that have gone through a period of underperformance and are suffering from a maximum amount of bearishness, but where there are also some fundamental underpinnings as to why the strategy or the manager should see a rebound or reversal. For example, last year I highlighted MLPs, which were experiencing severe declines connected to the precipitous fall in energy prices. In 2016 though, the HFRX MLP Index was one of the best performing hedge fund strategies and returned an annual gain of 29.2%.
So using the same framework of looking at hedge fund strategies that have lagged, one strategy that has underperformed not just in 2016 but for several years now is discretionary macro. In May 2000, just as the tech bubble was bursting, the New York Times ran a story entitled "Hedge Fund Industry Creates a Dinosaur: The Macro Manager." The impetus for the story was likely the performance of the S&P 500 doubling the performance of the HFRI Macro Index over the previous three years (81% vs 39%). However, after that story ran, the S&P 500 proceeded to decline by 35% over the next 3 years while the HFRI Macro Index gained 23%. Now we are not calling for...