Funds bet on recovery
TORONTO - Some global hedge fund investors are going into 2021 optimistic about a speedy snapback from the economic challenges related to the coronavirus pandemic.
Hedge funds, which use leverage and employ more aggressive, often riskier strategies than other investors, believe many previously undesirable sectors, ranging from energy to retail, will rebound in 2021.
Accounting for roughly $3 trillion in assets, hedge funds showed resilience in 2020, with many outperforming the market, according to investors.
“We think 2021 is going to be a really positive year for the markets,” said Jason Donville, president and CEO at Toronto-based hedge fund Donville Kent Asset Management.
He forecasts an explosion of pent-up demand for travel and leisure producing a period of “super growth”.
“I think it will take a little while for the vaccines to roll out and then somewhere around March, April, May, you're going to get a confluence of the vaccines getting to a certain critical mass... and infection rates dropping.”
For 2020 as a whole, the S&P 500 unofficially rose 16.26 per cent, a stunning rally from a bear market that kicked off when the pandemic spread rapidly earlier in the year.
“What I would say about 2021 is it looks like it's going to be a year of recovery,” said Robert Sears, chief investment officer at UK-based Capital Generation Partners, which invests in hedge funds globally. “That's the consensus view.”
The gainers in 2020 included the S&P 500 Information Technology Sector, up more than 42 per cent as the sector benefited from the abrupt acceleration of online trends.
On the other hand, the S&P 500 Hotels Restaurants and Leisure eeked out a gain of 1.4 per cent.In the past quarter, however, leisure stocks have rebounded as vaccine rollouts have accelerated hopes of recovery.
“I think macro conditions are going to continue to be quite volatile, so macro should have a good year,” said Mr Sears, referring to funds that invest according to macroeconomic trends.
He added that funds that specialise in currencies and commodities should do well.
Jack McIntyre, a portfolio manager at $62 billion US firm Brandywine Global, which runs a macro hedge fund strategy, said there will be “less uncertainty and more certainty” in the new year.