Hedge Funds Commentary

Dominic O'Connell kindly invited me on the Today programme this morning to give my perspective on what is happening in the world of hedge funds. We talked about why some big and long established hedge funds have seen declining AUM, have been losing money and have even been closing. I explained why some of the big macro funds might be finding it difficult to make money in a world of very low interest rates (although actually I think there have been plenty of opportunities to make money, and those who lost money being short of the Swiss Franc were simply making the wrong trade). And we talked about how difficult it is for equity investors to outguess the machines - in a world where

  • the banks have withdrawn liquidity
  • where ETFs form an increasing proportion of the investment base (and indeed the trade)
  • where quants algorithms have a significant influence on flows
  • where hedge funds are often forced to unwind positions

it can be difficult to reply on conventional measures of support for stocks. What used to work may no longer work, and an assessment of positioning is as critical to getting stocks right in the short term as fundamentals. This seems very strange but it's a sign of the times.

The interview is at 1.18 on the site here: Today programme 17 October 2016

Thanks to Dominic and I look forward to coming back.