Part I looks at the history and industry trends of hedge funds as I know it. Part II looks at whether currently successful hedge fund strategies are replicable.
Thought provoking as usual, thanks for sharing Russell.
I think what you've written just highlights the perpetually cyclical nature of capital markets. "This time it's different" is always the most dangerous phrase.
Essentially a "winning strategy" works until a reversal in a major market index (Nikkei, NASDAQ, S&P500 etc...)
So the question is that - what survived the rout of 2021-2? What "held up" between Oct 2021 - Dec 2022 has a high likelihood of being the next "winning trade".
Seven years after my exit from the industry I still get asked the same question!
It always seems like a no-brainer to people on the outside...
If you can generate alpha... or a lot of levered beta... or aggregate a lot of AUM then the answer is yes.
Well most people that generate levered beta are sure they are generating alpha…. I am sure Bill Huang thought he was an alpha king!
Yes it does seem that the Hedge in Hedge Fund was silent at times or at least optional.
Thought provoking as usual, thanks for sharing Russell.
I think what you've written just highlights the perpetually cyclical nature of capital markets. "This time it's different" is always the most dangerous phrase.
Essentially a "winning strategy" works until a reversal in a major market index (Nikkei, NASDAQ, S&P500 etc...)
So the question is that - what survived the rout of 2021-2? What "held up" between Oct 2021 - Dec 2022 has a high likelihood of being the next "winning trade".
so far short bonds looks the trade to me... keeps on giving
I like to think in terms of a "base trade" and then the "cream and froth" and finally "comeuppance"
For example:
1990s - Strong dollar policy (aka Rubin Dollar) - Long SPX - Tech boom - AOL-time Warner peak
2000s - China enters WTO (aka Era of BRICs Jim O'Neil) - Long EM - Commodities boom - Lehman crash, EU debt crisis
2010s - Software eats the world (aka era of FAAMGs) - Long Tech - QQQ - Covid, crypto rout
2020s - The return of history (??? era) - Long commodities, value - turning point TBD
By the way, for what it's worth my belief is that Japanese equities in the 2020s are the QQQ of the 2010s and 1990s. Timestamp this please 😉
Seems a decent bet to me!
Yes
Short bonds has worked very well
Long gold hasn't though
I'm a bit wary about betting on higher commodity prices at this stage
My observation is that when short bonds is not working - gold works. Ulitmately I think inflation gets outs of hand and both sides works for awhile