{"id":103850,"date":"2021-01-04T07:44:58","date_gmt":"2021-01-04T07:44:58","guid":{"rendered":"https:\/\/fin2me.com\/?p=103850"},"modified":"2021-01-04T07:44:58","modified_gmt":"2021-01-04T07:44:58","slug":"hedge-funds-bet-on-recovery-in-2021","status":"publish","type":"post","link":"https:\/\/fin2me.com\/business\/hedge-funds-bet-on-recovery-in-2021\/","title":{"rendered":"Hedge funds bet on recovery in 2021"},"content":{"rendered":"
TORONTO (Reuters) – Some global hedge fund investors are going into 2021 optimistic about a speedy snap-back from the economic challenges related to the coronavirus pandemic.<\/p> Hedge funds, which use leverage and employ more aggressive, often riskier strategies than other investors, believe many previously undesirable sectors, ranging from energy to retail, will rebound in 2021.<\/p>\n Accounting for roughly $3 trillion in assets, hedge funds showed resilience in 2020, with many outperforming the market, according to investors.<\/p>\n \u201cWe think 2021 is going to be a really positive year for the markets,\u201d said Jason Donville, president and CEO at Toronto-based hedge fund Donville Kent Asset Management. He forecasts an explosion of pent-up demand for travel and leisure producing a period of \u201csuper growth.\u201d<\/p>\n \u201cI think it will take a little while for the vaccines to roll out and then somewhere around March, April, May, you\u2019re going to get a confluence of the vaccines getting to a certain critical mass… and infection rates dropping.\u201d<\/p>\n For 2020 as a whole, the S&P 500 unofficially rose 16.26%, a stunning rally from a bear market that kicked off when the pandemic spread rapidly earlier in the year.<\/p>\n \u201cWhat I would say about 2021 is it looks like it\u2019s going to be a year of recovery,\u201d said Robert Sears, chief investment officer at UK-based Capital Generation Partners, which invests in hedge funds globally. \u201cThat\u2019s the consensus view.\u201d<\/p>\n The gainers in 2020 included the S&P 500 Information Technology Sector, up more than 42% as the sector benefited from the abrupt acceleration of online trends. On the other hand, the S&P 500 Hotels Restaurants and Leisure eeked out a gain of 1.4%.In the past quarter, however, leisure stocks have rebounded as vaccine rollouts have accelerated hopes of recovery.<\/p>\n \u201cI think macro conditions are going to continue to be quite volatile, so macro should have a good year,\u201d said Sears, referring to funds that invest according to macroeconomic trends.<\/p>\n He added that funds that specialize in currencies and commodities should do well.<\/p>\n Jack McIntyre, a portfolio manager at $62 billion U.S. firm Brandywine Global, which runs a macro hedge fund strategy, said there will be \u201cless uncertainty and more certainty\u201d in the new year.<\/p>\n Financials are a sector that has been challenged by coronavirus and could be supported by a recovery, said Philippe Ferreira at Paris-based fund of hedge fund Lyxor Asset Management, adding that the sector typically performs better in the initial stage of a recovery.<\/p>\n \u201cManagers are easing the short bias toward financials because we are entering a recovery,\u201d said Ferreira, whose firm invests in hedge funds globally.<\/p>\n The S&P Financial Index fell around 4.3% in 2020 despite rebounding in the fourth quarter.<\/p>\n \u201cOn the macro side, managers say that with rates so low, they are diversifying fixed income with inflation and especially on the U.S. side and gold,\u201d said Ferreira.<\/p>\n North American energy is another beaten-down sector popular with hedge funds, market participants said. The Canadian Energy Sector Index lost 37.8% over the entirety of 2020 while a comparable index for the U.S. fell 37.3%.<\/p>\n \u201cAnything in energy… all of that is a COVID recovery play to the extent the demand for fuel goes up, people start going back to the office more,\u201d said one Canadian hedge fund manager.<\/p>\n \u201cWe\u2019re adding the names like AltaGas, Pembina and Canadian Natural Resources and we\u2019ve been a buyer since post-the U.S. election.\u201d<\/p>\n AltaGas stock plummeted 60% in March and is down 5.1% for the year through Dec. 31. Shares in Pembina and Canadian Natural Gas fell 61.3% and 27.3%, respectively, over 2020.<\/p>\n \u201cI would say that energy consumption is going to make a very healthy recovery and probably continue on an above-historical year-on-year level,\u201d said Jay Tatum, portfolio manager at New York-based metals-focused Valent Asset Management. He added that oil was only one source of energy that would see growth.<\/p>\n