A hedge fund performance shift is beginning to take shape, as the second place spot on the HSBC Hedge Weekly performance list is now a long/short hedge fund player and managed futures CTAs that dominated last week slip down or off the performance list. The number two fund manager in second place, John Burbank’s $550 million Passport Special Opportunities Fund, however, is a rarity in the category. With this in mind, how does a long/short portfolio manager generate noncorrelated performance? At Lazard, both a managing director in portfolio advisory and separately a long/short portfolio manager provide ValueWalk readers insight. 

Hedge fund performance shift

Hedge fund performance shift begins as managed futures performance leaders from last week knocked down or off the performance list,

Last week, ValueWalk noted the potential for a hedge fund performance shift to take place. On this week’s performance list, short term mean reversion player Roy G. Niederhoffer’s Diversified Offshore fund, which was up 14.52% last week and in third place, one week later is reporting 8.70% year to date positive returns and is 12th place. Managed futures CTAs and other quantitative players knocked off the list include Crabel Fund, Welton Global Directional Portfolio, Two Sigma Compass, Eagle Quantitative Macro and Millburn Diversified Program.

Many of the quantitative hedge funds should be expected to experience challenging situations when beta market environments change direction. As noted in ValueWalk, significant changes in commodity, currency and stock markets have been causing short term problems. This, however, might bring opportunity in the future for such programs.

Managed futures CTAs nonetheless represent some of the best performers of all hedge fund strategies thus far. The HSBC Managed Futures Currency / Global category, for instance, is up 3.17% year to date. The Systematic / Global category, which contains many of the largest funds, is up 2.70% year to date.