Cover In A Storm

Published by Bob Elliott on May 3, 2022 4:37:39 PM

It has been a difficult year for most investors. Most major liquid asset classes are down. And passive investments in the few that are up this year – like oil and gold – would have been a drag on a portfolio in previous years.

A notable exception to this dynamic is the performance of hedge funds. Performance for the year through April looks to be roughly flat following a nearly 10% positive return net of fees in 2021. 

Hedge funds are unique among asset classes because of their ability to move nimbly long and short as conditions evolve. This year much of the return has come from the global macro strategies who shifted to short bonds and built long positions in commodities. Equity L/S managers limited losses by rotating toward value and lower beta sectors. The result is that these funds have limited downside during challenging conditions.

Zero return may not sound so great when we’ve all been used to double digit upside. But this period shows that strategic investment in hedge funds can be like finding some cover in a storm – you may emerge a bit wet once the storm passes, but it’s much better than standing in the rain.

Cumulative Drawdowns

For informational and educational purposes only and should not be construed as investment advice. The historical analysis discussed herein has been selected solely to provide information on the development of the research and investment process and style of Unlimited. The historical analysis should not be construed as an indicator of the future performance of any investment vehicle that Unlimited manages. No investment strategy or risk management technique can guarantee return or eliminate risk in any market environment. No Representation is being made that any investment will or is likely to achieve profits or losses similar to those shown herein.

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