Women have broken every professional barrier and risen to the top of every industry. Yet, for some reason, there are still few senior women in hedge funds and practically zero in investment roles. A 2015 study by Ernst & Young, KPMG, and Morningstar, found that only 2% of hedge funds are led by women, fewer than 20% have female portfolio managers. Dominique Mielle, once a partner and senior portfolio manager at Canyon Capital and now an author and consultant, shares her thoughts on how the hedge fund industry can—and should—be more inclusive.
When clients make requests it behooves any service provider to listen and respond. The same must be true for hedge fund consumers: clients must require hedge funds to include women on their teams and even reject funds that do not. This is the primary external impetus that will necessitate and facilitate change. In 2017, for example, major firms (BlackRock, State Street, and Fidelity) insisted on corporate diversity. Companies with exclusively male boards would not have their support. Today, there is only one S&P 500 company that has a fully-male board. The state of California passed a law requiring all public companies headquartered in the state to have at least three women on their board by the end of 2021. The same kind of requirements should be made for hedge fund leadership. Only these kinds of “forced” changes will actively shift the landscape.
Leaders in the hedge fund industry need to take a deep and serious look at the extensive research pointing to the corporate and cultural benefits of diversifying their ranks. Profits, progress, and policymaking are all enhanced when teams include a broad range of professionals. It is on colleagues, clients, and consultants to point executives to this information and insist that it be internalized and applied.
Persistence and Perseverance
According to Mielle, it isn’t enough for women to insist on the right to be heard, included, or considered, they must also stay the course and continue to fight even if/when things get hard. Being willing to compete is in and of itself an important step; withstanding internal fracases and awkward office dynamics is part of the job. Research finds that female hedge fund managers perform equally or better than men, fewer assets are attracted to them. This means that women must surpass and outshine men to achieve success and that will only be possible if they remain in the game.
SCU stock returned 3.4% since the end of the second quarter and has consistently outperformed the market by wide margins.
Sculptor’s current success and favor might stem from its recent change in leadership. Jimmy Levin, as the new CEO, is committed to an investment model that is based on full collaboration across their teams and products. In turn, this has yielded a boost in 2020 returns. Their new dividend policy favoring shareholders has equated a 12% yield at the current share price ($3.19 in dividends), which is likely also a contributing factor.
Over the past ten years, the hedge fund industry has grown and driven the demand for quality equity research. As global hedge fund assets have risen continuously, there is also continued growth in platform hedge funds (sector-focused funds with dedicated portfolio managers concentrating on one sector). These funds maintain a meticulous and scrupulous approach that depends on industry-driven, insider information.
Bank of America says its analysts’ work and client base also reflect this new shift. The investors and those informing their decision-making are focused on the longer term; they are all looking at the broader picture while maintaining focus on the immediate.
According to David Adelman, director of equity research for the Americas at Morgan Stanley, the success stems from a holistic approach. Adelman insists that “Morgan Stanley doesn’t have a hedge fund research product. We have a research product that is trying to provide differentiated insight to help all investors make decisions. [Our product] is both strategic and long term and has a real analytical framework, but we aren’t opposed to having a differentiated view making short-term calls as well.”
Private equity, credit companies, and hedge funds make up the latest wave of sports investors. As more investment firms find themselves with extra resources, they are expanding their strategies and laying stakes in the world’s most popular sport. 777 Partners, a Florida-based financial firm, purchased Genoa in September 2021; CVC Capital Partners made a $3.2 billion private equity investment in Barcelona’s La Liga in August.
In the post-pandemic world of sports, teams are desperate to pay off debt incurred by the abrupt and prolonged cessation of games. For the hedge fund investors, the risk lies primarily in the unpredictable business model of the sporting world: team debt, bloated salaries for players, unpredictable fans, potential league demotions, and even politics.
Geography had little effect on these findings: managers in EMEA, the UK, and the Asia Pacific all showed confidence. Only U.S. based managers showed slight hesitation because of Delta variant concerns, but they all viewed it as a “temporary setback with travel expected to recover strongly”.
Diamonds have long been a sound investment. Historically they have been a preferred investment form for many reasons. Diamond expert Mozes Victor Konig has seen – especially in the last three or four decades – an escalation in the popularity of this type of investment.
“There was a study conducted by Tilburg University and HEC Paris finance professors Luc Renneboog and Christophe Spaenjers,” Konig explains. “They found that between 1999 and 2010 the return of global stocks was an annualized minus-0.1% and global bonds stood at 3.3%. If you compare that to the same period for diamonds you have white diamonds at 6.4% and colored diamonds at 2.9%. Those numbers speak for themselves,” Mozes Victor Konig added.
There are other advantages to investing in diamonds. These include:
Portability (so small that they are easy to move around and hide if necessary)
Value increase (over time the value really does increase in most cases)
Endurance (being one of the hardest elements they can withstand pretty much any situation)
No credit risks (inflation and currency fluctuation do not impact the precious gemstone)
Supply versus demand (supply is dropping and demand increasing)
Sentimental value (passed down throughout generations, people are reluctant to part with their spouse’s great grandmother’s rings).
In a nutshell, diamonds really do make a great investment choice.
Year-to-date returns for hedge funds are showing signs of recovery, particularly in emerging markets where managers are spurring the playing field and pushing gains.
Both BarclayHedge and eVestment recently published data showing the extent to which emerging markets and Asia-focused hedge funds bypassed other geographical regions in August, upending the July downturn.
The overriding theme points to a shift in consumer spending in evolving economies which is also linked to the development of the middle class in emerging markets that have increased disposable income. Even with the market volatility of Covid-19, the confluence of people in emerging markets getting wealthier and older, the increase in virtual and online consumerism, and a flourishing local travel economy, yielded positive returns for hedge funds in these markets.
For the first time in over a decade, hedge funds are celebrating some consistent success. During the global crises of 2020, the industry touted an 11.8% return, recording the best year since 2009’s crash.
According to the Financial Times, “Investors are certainly taking notice of the hedge fund industry’s renaissance. After withdrawing more than $170bn during the previous five years, they invested a net $18.4bn in the first half of 2021, according to HFR. As a result, the global hedge fund industry’s overall assets under management have swelled to a record $4tn this year.”
“We’ve seen significantly positive, double-digit returns across just about every strategy. That’s caught the attention of a lot of people, us included,” Mark Anson of Commonfund said.
Earlier this year, hedge fund moguls and their investors participated in the exclusive annual Morgan Stanley event. Usually held at Breakers Hotel in Palm Beach, this year the gathering took place remotely, but the energy was fully charged.
“This was the first time in many years Breakers felt like a celebration — as much as anything can feel like a celebration online. It had an upbeat feel to it,” according to Sandy Rattray of Man Group.
Hedge Funds are demonstrating some newfound optimism as double-digit returns and increasing assets under management point to excellent business prospects.
Last week, hedge funds rated their economic confidence at +19.5, up from an average +18.4 from last quarter. The scale ranges from -50 to +50. A survey in the second quarter Hedge Fund Confidence Index from AIMA, Simmons & Simmons, and Seward & Kissel asked 300 hedge funds to consider the following points when assessing their outlook:
The firm’s ability to raise capital
The firm’s ability to generate revenue and mitigate costs
Overall fund performance
Remote work is also a factor. Many offices are back to operating, but most meetings are still held virtually. According to the HFR index, “There is a greater level of confidence in the virtual outreach with examples of new businesses being successfully onboarded.”
Hedge funds in equity are still the best-performing strategy, but global macro strategies are also doing especially well. The report states: “The accompanying volatility in equity and commodity prices is typically a good environment for macro funds to outperform. Increasingly investors are looking to the qualities that hedge funds demonstrate in being able to manage any downside risk from market volatility as well as the heterogeneity of their investment strategies which can provide the best potential for significant diversification as well as the highest potential for generating out-performance.”
Newsrooms across the United States took a severe hit to operations during the pandemic, even while readership increased significantly. Like many businesses, it was an unstable and damaging time; more than 70 local newsrooms have shut down over the last year.
This problem has been in the works for more than a decade, as print has been overtaken by digital copy. Half of the newspapers in the U.S. today are owned or run by hedge funds and other financial firms, according to a study by the Financial Times.