One thing to start: Capital Sequoia is not an asset manager in the traditional sense, but the group – considered by many to be Silicon Valley’s premier venture capital firm – is certainly reshaping the investment landscape. Here is the profile of its new leader Roelof Bothaa choice that shows a shift in the balance of power within the firm that supported Apple, Google and ByteDance.
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Among the largest dispersion since the financial crisis
Market turmoil caused by Russia’s invasion of Ukraine and rising inflation have sharply divided the hedge fund industry, with macro hedge funds celebrating one of their best starts to the year as technology and growth funds are racking up double-digit losses.
The richest 10% of hedge funds gained an average of 24.3% in the first quarter, while the bottom decile fell 15.4%, according to the data provider. HFR, which follows the sector. The dispersion is one of the largest since the last financial crisis.
Among the hardest hit by the troubles in consumer, technology and growth stocks are world tiger, Capital of Melvin, whale rock and RiverPark. And the biggest winners were computer and global macro names such as BH-DG Systematic Trading funds, Leda Bragait is Systematic, Capital Aspect and Bridgewater.
Meanwhile, traditional fund managers were stumbled by the simultaneous fall in global stocks and bonds in the first quarter, undermining the balanced 60/40 approach that has been the mainstay of investment portfolios during the year.
Duncan MacInneschief investment officer at £25.3bn wealth manager Ruffer said:
“Conventional wallets are in big trouble. Correlations between assets are much higher than they used to be and there is an illusion of diversification in the industry. Everyone is doing worse than they thought.
Somewhere else Ashmore and other emerging market fund managers face further declines in profits and worsening outflows as investors pull back on worries about rising interest rates, the war in Ukraine and the exposure to China.
Bank of America cut its earnings per share forecast for Ashmore by 6-9% for the first quarter of 2022 and expects assets under management to fall another 11% – among the biggest forecast falls for UK managers surveyed by BoA . Other leading investors with significant investments in emerging markets, such as Abrdn, Schröders and group of men are also exposed to these pressures.
Contrarian manager still sees value in Russia
How much of a write is too much? After Russia invaded Ukraine and was hit with sanctions, most major asset managers reduced the book value of their Russian stocks and bonds to zero or somewhere close to it. For those with large positions, this has hit net asset values hard – but the funds could reassure investors that the worst news was already in.
Now comes the fund manager David Iben to challenge this conventional playbook. The investment manager of Kopernik Global Investors tell my colleague Brooke Masters in New York that he thinks the full writedowns are a “marketing ploy” that underestimates Russia’s potential and penalizes current investors in hopes of boosting future returns.
Tampa, Fla.-based Kopernik cut its valuation of stocks such as Gazprom, Sberbank and polyus by 70% on average and the invasion knocked about $700 million off its Russian assets. But Iben argues that it would be a mistake to go further. He said:
“Marking them to zero is unfair because it is likely that these companies still have a lot of value. If you mark it zero, new people entering a fund get a good deal. Anyone leaving the fund gets zero for something that’s probably worth something.
Iben also dismissed calls to sell Russian assets, likening them to efforts to get investors to shun fossil fuels. “Selling Gazprom would do Russia no harm,” he said. “We all want less pollution and we all want peace in the world. Selling shares without thinking 90% is not a way to achieve these goals.
Should Russian Assets Be Zeroed? Email me: [email protected]
Chart of the week
The US government bond market is signaling concerns of an impending recession, but past experience suggests the trend doesn’t always bode well for the country’s stock market.
An “inverted yield curve” – when short-term government bonds offer higher yields than longer-term government debt – has generally been seen as an indicator of impending economic contraction.
And late last month, that indicator turned red when the yield on two-year U.S. Treasuries briefly topped the yield on 10-year Treasuries for the first time since 2019.
German Bank became one of the first major banks to say its baseline economic forecast now includes a recession from the end of 2023. More than half of institutional investors polled on the reversal by Royal Bank of Canada said they were “very worried” or “somewhat worried” about the yield curve and 42% said they expected a recession before the end of next year.
Still, that may not translate to a stock market crash. According to Goldman Sachs.
The data highlights the fact that although the bond market has a decent balance sheet as a warning sign, downturns often take a while to arrive. Markets also tend to rebound faster than the broader economy, as evidenced by the rally following the initial wave of the coronavirus pandemic.
10 stories not to miss this week
Rokos Capital Management is looking to set up shop in Hong Kong, despite years of social and political upheaval in the territory that have pushed back other businesses, as the $13 billion fund run by Chris Rocos tries to recover from a difficult year.
Adelphe Capitalone of London’s oldest hedge funds, is to transform into a family office after a recent string of poor performance in the latest sign that equity managers are struggling to handle a strong sell-off in the markets.
Investors are buying up US farmland in search of an inflation hedge as commodity shortages caused by Russia’s invasion of Ukraine push global food prices to record highs.
Berkshire Hathaway took a stake in a manufacturer of computers and printers HP Inc. worth $4.2 billion, the third multi-billion dollar investment by warren buffetof the group in about a month.
BinanceThe American subsidiary of was valued at $4.5 billion in its first fundraising, far less than the $8 billion price awarded to its rival United Statesas regulatory concerns cloud outlook Changpeng Zhaosprawling network of crypto companies.
The world’s leading group of securities regulators has warned that the coronavirus shock to corporate bond markets has exposed loopholes that need to be addressed to avoid further disruptions to market functioning and liquidity, in especially in crisis conditions.
black rockAladdin’s software system may not bring the funds industry everything it wants, the The ex argues the column. If most large investors used the same risk parameters, they could make the same mistakes, promoting systemic instabilities.
The ex also takes on the buying spree of asset managers, arguing that higher rates won’t curb mergers and acquisitions.
United Kingdom Minister for the City John Glen outlined Britain’s plan to become a “global hub” for the crypto industry, including a package of measures ranging from proposing new regulations for stablecoins to a Royal Mint NFT. Meanwhile, the UK Financial Conduct Authority plans to strengthen law enforcement operations across financial services.
More private fund managers will hear their doors knocking from U.S. financial regulators this year as the Security and Exchange Commission tightens its monitoring of the booming market in unlisted assets.
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