Hedge Funds Now Playing in the Major Leagues

Sports teams and sporting franchises were once owned by families. Nowadays, even with the economic instability around the world, hedge funds and investment consortiums are buying up the big players.

In May 2022, Todd Boehly put together a conglomerate deal of $5.3billion to buy the Chelsea football club. Roman Abramovich, the club’s previous owner, put the team up for sale earlier this year. Clearlake Capital, a California-based investment firm, is the majority shareholder and Boehly is acting as the controlling owner.

Of particular interest is the fact that Boehly, who already co-owns the Los Angeles Dodgers, outbid 11 other investment groups—a clear sign that hedge funds and money managers see the Premier Leagues, and sporting names in general, as promising opportunities.

“[We] are seeing more money coming into sport from institutional investors,” said David Gandler, the co-founder and director-general of fuboTV, the American TV streaming provider.

Highest Hedge Fund Inflow in seven years

The current financial volatility, spiraling inflation, market uncertainty, hardline constraints of central banks, and geopolitical conflict in Europe seem to be doing nothing for the hedge fund industry. The assumption that investor involvement in the market might be reduced by all these factors, opting for care and restraint in tenuous times, is proving to be entirely unfounded.

Hedge Fund Research (HFR) recently released a report indicating that institutional investment in the first quarter of 2022 was the highest new capital hedge fund allocation since the second quarter of 2015. Furthermore, the research suggests that all those elements— inflation, increased interest rates, and war in Eastern Europe—are the motivators of this seven-year-high.

Will this hedge fund trend continue for the remainder of 2022? According to a Barclays’s survey from February of this year, the prospects are promising. The continued acceleration of inflation is likely to prompt investors to lower their exposures to cash, passive-equity, and fixed-income; hedge funds are the safe alternative. Preqin, an investment-data firm and hedge-fund specialist, on the other hand, is less hopeful. Looking only at performance, the first quarter of 2022 was among hedge funds’ most dissatisfying quarters.

“Institutional investors are likely to continue increasing their commitment to funds combining effective, volatility-positive, capital preservation with managers offering opportunistic exposure to interest rate and inflation trends, with these effectively complementing existing portfolio holdings and duration. Funds tactically positioned to navigate these multi-asset trends are likely to lead industry performance and growth through mid-2022.” 

Kenneth J. Heinz, president of HFR

Neil Cole, Founder of Iconix

Some companies stand the test of time, and Iconix Brand Group is one such example. Neil Cole founded the company, which has become the world’s second largest branding company. Iconix was named by Forbes Magazine as one of “America’s Best Small Companies” and it is certainly a company worth learning about.

They are currently the owners of 35 iconic brands and they represent $13 billion in annual retail sales. As marketing, brand management and merchandising experts, they specialize in licensing, merchandising and marketing/PR. Their portfolio includes a dizzying array of companies from Sharper Image and Royal Velvet to Waverly, Candie’s and Material Girl.

As the founder of Iconix Brand Group Inc., Neil Cole led the company to become the second largest licensing company in the world, only behind the Walk Disney Company. Their portfolio included a diversified group of intellectual properties that spanned fashion, home and character-based brands. They are certainly one to watch.

Crypto as a Driving Force in Hedge Fund Growth

The FX market has been unpredictable for quite some time, but now it seems that hedge funds with a quantitative concentration—those known for making lightning-speed trades on grand scales—are looking at crypto for their next big investment move. Crypto’s value differs significantly across markets yielding a plethora of opportunities for hedge fund managers with strong computer skills and strategies to reap large returns swiftly; the extreme price variability offers quick profit.

Overall, crypto assets have expanded by close to 200% in the last year, going from less than $800 billion to $2.3 trillion. This growth can be attributed to the overall dearth of oversight in this area, leaving it wide open for market-making opportunities. The latest report from PwC indicated that quantitative trading strategies are used the most often in crypto exchanges. These approaches use a simultaneous buy and sell strategy to profit from price differences between coins; they are perfect for markets that are low compliance and highly fluid.

But only the swiftest and most agile hedge funds—those that manage to refine their trading practices in real-time—will manage to survive and thrive in this constantly changing market. They will need a comprehensive solution for their extant trading requisites that they can then use alongside mainstream market data. Managers will need to not only be connected to the regulated crypto exchanges but also bypass major counterparty-to-counterparty platforms.

Gold is Again on Trend for Hedge Funds

Commodity analysts from Societe Generale report that money managers bought $7.1 billion in gold in February. This is the fourth-biggest week of bullish buying since 2006, when CFTC started its updated reporting. Most explanations for this rise point to recent geopolitical instability. While gold is an imperfect hedge for funds, it is an appealing asset against inflation and other stock market risks.

New Investment Opportunities for Hedge Fund Industry

The pandemic continued to affect the economy throughout 2021, hedge funds proved to be a flexible and adaptive industry. New investment strategies and strong earnings also yielded an improved opinion of hedge funds in general, according to the 2021 EY Global Alternative Fund Survey.

210 managers and 54 investors participated in the survey and showed that the industry is taking on new prospects for investment including digital assets and special-purpose acquisition companies (SPAC).

The survey also showed that hedge funds are focusing more on environmental, social, and governance (ESG) standards in the investment decisions process. Similarly, attention is being given to considerations of diversity and inclusion at the managerial level. But even while fund managers indicated substantial diversity in the back offices, fewer than one in 10 hedge funds can claim 30% or more females in the front office. The representation of minorities is even lower.

2 New Leaders at Bridgewater

Bridgewater, the largest hedge fund in the world, has appointed two new CEOs.  Nir Bar Dea, who is being promoted from his current role as deputy chief executive of Bridgewater, and Mark Bertolini, a member of the board of Bridgewater.

Bar Dea, 40, has been with Bridgewater since 2015; he has been deputy CEO since February 2021. Bar Dea once served as a major in Israeli Defense Forces and has been the primary strategist for Bridgewater’s pandemic policies and planning. Bertolini, 65, has been on the board of Bridgewater since 2019. From 2010 through 2018, he was CEO of Aetna, the American insurance company.

The pair will lead Bridgewater instead of David McCormick who recently announced his intention to run for U.S. Senate.

Bridgewater has some 1,500 people on staff and manages pensions, sovereign wealth funds, and other big investors in the amount of nearly $150 billion.

Hedge Fund Consolidation: Eisler Capital and Glen Point Capital

Mergers and acquisitions are not a common step for hedge funds. But the increased stresses of the industry, including skyrocketing costs and investors’ penchant for established entities, is forcing many funds to close their doors. Some are opting to merge with bigger institutions, like Eisler Capital which is acquiring Glen Point Capital in a rare hedge fund consolidation.

The transaction expands Eisler’s assets by $1.5 billion, bolsters the staff with new traders, and adds three new funds. Cumulatively, the deal transforms the firm into a multi-strategy investment platform.

Both firms are based in London and started in 2015. Over time, Eisler has expanded their portfolio as part of its efforts to compete with Millennium Management and Citadel for investors, resources, and staff. The deal is expected to close in March and the specifics of the financials were not made public.

Female Founded Hedge Funds is (finally) on Trend

According to the Kresge Foundation, female leadership in hedge funds represents less than 10% of the overall industry. But nine new funds are indicative of a long-awaited change in the hedge fund industry: they are being led by women.

These women have spent their initial years in the industry earning money and fostering connections that they are now using to start their own offices. This also coincides with the investor climate that promotes diversity as a means of boosting performance.

Many of these firms have exceeded $1 billion in assets including Angela Aldrich’s Bayberry Capital Partners and Lauren Taylor Wolfe’s Impactive Capital LP. This puts them on the coveted and exclusive list of nearly 500 funds at that level.

“More investors are recognizing that day-to-day investing is about decision-making, and the science is very clear that more diverse teams make better decisions. Why would we think that every good investment idea needs to come from a White male?”

–Rob Manilla, vice president and chief investment officer at the Kresge Foundation.

Neil Barsky Steps Away from Marshall Project

Former hedge fund manager Neil Barsky is leaving his role as the Chairman and founder of the Marshall Project.

Barsky has spent seven years growing the organization which won two Pulitzer Prizes, including one in 2021 for  national reporting, and its 54 employees with a nearly $12 million budget.

His plans for the future include a new investment opportunity to support and fund female and minority asset managers.  According to Mr. Barsky, the money management industry is long overdue for a self-imposed review of its diversity and inclusion; he wants his new fund to back the enormously underfunded but extremely promising talent and skill that exist within the industry.