Brief : For years, Renaissance Technologies was among the most exalted names in high finance, as close to a sure-thing as Wall Street had. But recent months have battered its reputation, and investors are now streaming to the exits. Renaissance has seen at least $5 billion in redemptions since Dec. 1 -- a once-unthinkable rebuke from clients after unprecedented losses from the East Setauket, New York-based firm. The walkout comes after three funds open to the public fell by double digits last year, their computer models flummoxed by the rapid stock market crash and even faster rebound. Renaissance now finds itself in a position unlike any other in its near 40-year history: Trying to convince investors who once clamored to get into its funds that it’s still worth their money, and can be trusted to deliver market-beating returns.
Brief: European Central Bank President Christine Lagarde pledged monetary support for the economy amid extended coronavirus lockdowns and said governments must do the same. “The renewed surge in Covid-19 cases, the mutations in the virus and the strict containment measures are a significant downside risk to euro-area economic activity,” she told European Parliament lawmakers on Monday. “It remains crucial that monetary and fiscal policy continue to work hand in hand. Fiscal policy -– both at the national and at the European level -– remains crucial to bolster the recovery.” While the outlook is highly uncertain, the ECB chief noted that the start of vaccination campaigns across the euro area “provides the eagerly awaited light at the end of the tunnel.”
Brief: A class action lawsuit filed in California Southern District Court on 28 January, 2021 has been amended to include six hedge fund companies worth billions of dollars, a total of ten online brokers who manipulated the stock market, and the thirteen stocks involved. The various brokers and hedge funds allegedly conspired together to knowingly deprive retail investors of the ability to invest in the open market during an unprecedented stock rise, in order to benefit the hedge fund companies, such as Citadel, Melvin Capital, and Maple Lane Capital. The lawsuit alleges that the online brokers involved froze the everyday investors out to enable the hedge funds to stop losing money when the stocks rose in value. The lawsuit continues to allege that Robinhood and nine other online brokers failed to provide duty of care to their customers and that they purposefully harmed their customers positions in GameStop Corp (NYSE: GME) and twelve other stocks, such as Blackberry, LTD (NYSE: BB), AMC Entertainment Holdings Inc. (NYSE: AMC), Nokia Oyj (NYSE: NOK), Koss Corporation (NYSE: KOSS), and Naked Brand Group Ltd (NYSE: NAKD). The lawsuit is also alleging that Robinhood was recently fined USD1.5 million by the SEC, and a monitor has been assigned to watch their activities closely.
Brief: Investors pulled back from equity funds in January, with appetite for risk assets dampening as global coronavirus cases registered a post-holiday surge. Funds network Calastone found that December’s vaccine-fuelled inflows to equity funds “evaporated” in January, with net monthly inflows falling 97.5 per cent month-on-month to just GBP64.6 million. Total trading volumes in this period exceeded GBP21 billion. Heavy outflows of GBP965 million were dealt to active equity funds that lacked an ESG mandate, causing them to lose almost all of the GBP1 billion in new capital that they had gained in December. “The euphoria that characterised the huge inflows to equity funds in the last few weeks of 2020, including even unloved traditional active funds, dissipated with the cold light of the post-holiday hangover,” says Edward Glyn, head of global markets at Calastone. “The pandemic has increased in intensity in almost all parts of the globe, causing stock markets to falter and investors to curb their enthusiasm for equities.”
Brief: Hedge funds are turning bullish on oil once again, betting the pandemic and investors’ environmental focus has severely damaged companies’ ability to ramp up production. Such limitations on supply would push prices to multi-year highs and keep them there for two years or more, several hedge funds said. The view is a reversal for hedge funds, which shorted the oil sector in the lead-up to global shutdowns, landing energy focused hedge funds gains of 26.8% in 2020, according to data from eVestment. By virtue of their fast-moving strategies, hedge funds are quick to spot new trends. Global oil benchmark Brent has jumped 59% since early November when news of successful vaccines emerged, after COVID-19 travel curbs and lockdowns last year hammered fuel demand and collapsed oil prices. Last week it hit pre-pandemic levels close to $60 a barrel.
Brief: It’s been almost a year since in-person meetings were wiped from the calendar and replaced with all-virtual interactions. While investors and other professionals have since adapted to the efficiency of Zoom and other video platforms, research shows that physical meetings were worth the extra time and money for fund managers. Meetings between portfolio managers and company leaders were found to predict higher investment returns in a recent paper by researchers at the Massachusetts Institute of Technology, China Investment Corp., and Remin University of China. The study, which examined investor meetings with firms listed on the Shenzhen Stock Exchange in China — where companies are required to disclose such meetings — found that a higher number of face-to-face meetings were tied to outperformance of about 70 to 100 basis points per month. According to authors Eric So of MIT, Rongfei Wang of CIC, and Remin University professor Ran Zhang, the results likely stem from investors allocating more time and resources to meetings with firms that they perceive to be undervalued.