Analysis: Stock-picking hedge funds extend payday in trading after U.S. Election Day

In this news, we discuss the Analysis: Stock-picking hedge funds extend payday in trading after U.S. Election Day.

BOSTON (Reuters) – Some U.S. stock investors feared the turmoil of election week, but voter decisions at the polls helped many stock-picking hedge funds extend a year of gains and even set a daily record, according to reports. managers and people familiar with their performance.

Fund managers were positioned relatively cautiously in the run-up to the U.S. presidential election on Tuesday, uncertain about the future of corporate taxes, stimulus spending and regulation, managers and investors said. in their funds.

Instead, investors were treated to a stock rally fueled by hopes of a political stalemate, with Republicans likely keeping the Senate and Democratic challenger Joseph Biden in line to claim a White House victory once all the ballots are counted.

“The markets were initially nervous about a contested election, but now we have the impression that we are back to the future with the return of some technology stocks that were hurt a few weeks ago”, said Troy Gayeski, co-chief investment officer at SkyBridge Capital, which invests with some of Wall Street’s biggest hedge funds. “What we are seeing is an unwinding of the blue wave trade.”

Investors said many hedge funds avoided the risk in the weeks leading up to the election to avoid making a real mistake.

“While it was difficult to sit idly by, it was the right thing to do,” said Jason Landau, portfolio manager at Waratah Advisors.

Many long / short funds that bet on or against stocks had already posted high single- or double-digit gains in 2020. They extended their run on Wednesday as the S&P 500 climbed 2.2% and the heavy NASDAQ upward trend that continued in Thursday’s trading.

Coatue Management by Philippe Laffont gained 38% at the end of October, Sachem Head Capital Management by Scott Ferguson, which often pushes companies to perform better, increased by 17% at the end of October, Light Street Capital by Glen Kacher recorded a gain of 52% through October, and David Fiszel’s Honeycomb Asset Management rose 45%, people familiar with the numbers said. Representatives of the funds declined to comment.

Connective Capital of Robert Romero, a small tech-focused hedge fund, posted a 4% gain on Wednesday, its biggest of the year, leaving the fund up about 45% since January.

“We had one of our best days this year today – one of our best days, actually,” Romero told Reuters.

Another small hedge fund manager, Regan Investments, said it made 10% gains in its equity strategy in the year ending Nov. 4.

Toronto-based Vantage Asset Management rose 0.6% in its yield fund Vantage on Wednesday, bringing gains since January to 7%.

On Thursday, the votes were still counted as Democrat Joe Biden approached victory over Donald Trump for the US presidency.[L1N2HR0BX] But the official whom many stock pickers consider most important was not on any ballot: Federal Reserve Chairman Jerome Powell relieved investors with long-standing low interest rate promises.

“We’re going to have some noise around the election for a while, but the Fed will continue to provide liquidity,” said Adam Blitz, who invests in hedge funds as chief investment officer at Evanston Capital, adding that “it’s is already the strongest year in year for hedge funds. “

This has encouraged buying, even of cyclical stocks like heavy equipment manufacturers and solar stocks, which rose and then fell with the prospect of a massive stimulus package.

“We believe many of them will start to recover from the losses this morning,” said Shawn Kravetz, portfolio manager at hedge fund Esplanade Capital. “We are using opportunistic weakness to complement and strengthen some of our favorite positions.”

Hedge funds, long ridiculed for their high fees and low returns, now have a chance to regain investor confidence in a year when the market was continually rocked by health and economic crises, some managers said.

“Hedge funds need dispersion and volatility to perform and ultimately they get that at some point, they are needed to diversify portfolios,” said Darren Wolf, head of hedge funds at Aberdeen Standard Investments.

Reporting by Svea Herbst-Bayliss and Maiya Keidan; edited by Megan Davies and David Gregorio

Original © Thomson Reuters

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