3Q Update to Global Investment Report's 2022 Hedge Fund Survey
As we close out the year, extreme market volatility has dashed hopes that the worst of the selloff is over. Uncertainty is being driven by continued monetary policy tightening, intensification of the Russian war against Ukraine that’s fueling a global energy crisis, rising food costs, and now recession in Europe, which most observers believe will jump the Atlantic to the US next year. Growing liquidity concerns threaten to turn this troublesome brew toxic. All this makes the top 50 hedge funds’ performance even more noteworthy. The group was up nearly 4.5% through September, outpacing the market by 28 percentage points.
Q3 2022 hedge fund letters, conferences and more
Multistrategy, volatility arbitrage, and global macro funds again propel the Top 50 further into the black as the market selloff deepened
Early in November, the Financial Times’ Lawrence Fletcher gave us a rare glimpse at a recent Elliott Management investor letter. The venerable hedge fund warned economies and markets were likely to get much worse before turning around. The clear message: it’s different this time.
Paul Singer, manager of the $56 billion fund, believes an “extraordinary” set of financial extremes that have come as the era of cheap money draws to a close is making “possible a set of outcomes that would be at or beyond the boundaries of the entire post-WWII period.”
The asset manager says, according to Fletcher, that markets could correct by as much 50%, accelerated by hyperinflation and “losses on bridge financing and potential markdowns of collateralized loan obligations and leveraged private equity.”
Bill Winters, CEO of Standard Chartered Bank, which manages over $800 billion globally, feels a bit more sanguine. “It’s appropriate to be cautious right now,” he explains, “but the gloom, arguably, is overdone.”
Then in mid-November, US October inflation numbers came in well below expectations. They were coupled with continued job and retail sales growth and confirmation that the economy did grow in the third quarter, with initial estimates at a not too shabby 2.6%.
These few data points sparked a new round of optimism where some analysts cautiously walked out the prospect that we may finally be getting close to the hump.
All this gives credence to John Kenneth Galbraith’s quip: “The only function of economic forecasting is to make astrology look respectable.”
What to think?
Economist Desmond Lachman, a senior fellow at the American Enterprise Institute, puts things plainly: “The Fed is making the exact same mistake it made leading up to the crisis – except now in reverse.”
Read the full article here by Eric Uhlfelder, Advisor Perspectives.
