By Lydia Tomkiw January 4, 2023
*Selected excerpts appear below by permission from Money-Media Inc.
Hedge fund managers are starting 2023 after a year where the industry saw wide performance dispersion and elevated outflows. But amid the challenges of 2022, some strategies – especially macro, managed futures and quant strategies –are positioned to flourish and the majority of hedge fund investors have said they plan to hold allocations steady in the coming year.
Hedge fund managers say they are expecting a continued positive run for macro, managed futures and systematic strategies this year as investors navigate ongoing uncertainties that took root in 2022, including inflation, fiscal and central bank policies, questions around the possibility of a recession and global geopolitical risk from Russia’s ongoing war in Ukraine.
Macro impacts have returned to the marketplace in a big way, similar to the years from the 1970s to the 2000s, said Patrick Welton, founder and chief investment officer at Welton Investment Partners, which runs both macro and trend funds. The rate of growth, currency risk, input costs, labor and capital market fluctuations and security costs are among the factors and considerations that will matter significantly, he added, saying “2008-2021 were the unusual years.”
“All of those macro impacts are now returning to the marketplace,” he said. “They’ve returned to the marketplace. 2022 was a return of the opening… a back to the future.”
The implication, Welton said, is for investors to go find and hire specialist macro managers.
“All investments will be driven by macro factors,” he said. “…The volatility and left tail normalizations will demand a much more professional allocation focus than full risk-on leverage.”
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