Brief : Hedge funds are stacking up gains this year as shuttered economies continue to unlock, with the industry navigating volatility and inflation to score its best January-to-May performance in two-and-a-half decades. Hedge Fund Research’s main Fund Weighted Composite index – which tracks the investment performance of more than 1400 single-manager hedge funds across all strategy types – grew 1.7 per cent in May. That rise – which brought year-to-date returns up to the end of May to almost 10 per cent – was the eighth successive monthly gain for the index. In the trailing eight-month period, the FWC grouping surged 21.9 per cent, the third strongest such period on record. It was also the biggest January-to-May advance since 1996, when the benchmark gained more than 12 per cent over the same five-month period. The across-the-board gains for strategies of all stripes and sizes comes despite rising volatility in stock markets and increased inflationary pressures, said HFR president Kenneth Heinz. Managers are currently navigating this environment with an emphasis and focus on inflation/interest rate sensitivity and equity volatility management. Equity hedge funds’ overall performance has edged into double-digit territory on a year-to-date basis, with May’s 1.48 per cent gain putting the sector up 11.26 per cent in 2021. Energy and commodities-focused managers led the way, with successful oil market calls bringing monthly gains of some 3 per cent, and year-to-date returns up more than 18 per cent.
Brief: The World Bank is upgrading the outlook for global growth this year, predicting that COVID-19 vaccinations and massive government stimulus in rich countries will power the fastest worldwide expansion in nearly five decades. In its latest Global Economic Prospects report, out Tuesday, the 189-country anti-poverty agency forecasts that the world economy will grow 5.6% this year, up from the 4.1% it forecast in January. The global economy last year shrank 3.5% as the coronavirus pandemic disrupted trade and forced businesses to close and people to stay home. The projected expansion would make 2021 the fastest year of growth since 1973’s 6.6%. But the 2021 rebound will be uneven, the bank predicts, led by rich countries such as the United States that could afford to spend vast amounts of taxpayer money to support their economies: 90% of advanced economies are expected to return to pre-pandemic levels next year -- measured by income per person -- versus just a third of developing countries. The World Bank is calling for wider distribution of COVID vaccines to low-income countries, where inoculations have gone slowly.
Brief: As Manhattan slowly springs to life again, with Wall Street’s biggest firms pushing traders and bankers back into the office, the scene some 350 miles to the northwest, where North America’s No. 2 financial center lies, is vastly different. Toronto’s Bay Street is quiet, laid low by successive waves of COVID-19. Union Station, normally one of the continent’s busiest commuter hubs, is largely deserted, even in rush hour. It will get busier as the crisis eases but the financial district, most here agree, has undergone a change that is likely permanent. Unlike on Wall Street, where the likes of JPMorgan Chase & Co.’s Jamie Dimon and Goldman Sachs Group Inc’s David Solomon talk excitedly about filling offices back up, top Bay Street executives seem to be in no hurry to end remote work. If anything, they rave about how surprisingly efficient and profitable the arrangement has been. And some acknowledge that their employees have little desire to return to the office five days a week. In one recent comment that captured the mindset in C-suites across the city, James O’Sullivan, the head of fund manager IGM Financial Inc., spoke of a “new normal” where many employees spend part of their workweek at home. Manulife Financial Corp. Chief Executive Officer Roy Gori says remote work has been “incredibly” effective and the global insurer will continue to allow some of it when the pandemic is over.
Brief: The Covid-19 pandemic has prompted just over half of advised UK adults to move into the sustainable investing space, according to a report by Prudential. While the trend is common across generations, millennials led the way, with 60% taking up sustainable investing, followed by 44% of generation X and 35% of the baby boom generation. Catriona McInally, investment expert at Prudential UK, said: “With £5.5 trillion (€6.4 trillion) in personal wealth due to be passed to the next generation by 2047, the role intergenerational planning advice played, prior to the pandemic, was already a significant one. Yet the crisis has reframed financial priorities. Not just for those later in life with IHT [inheritance tax] liabilities, but for all generations.” Research for the report was carried out by Opinium, which surveyed 1,000 advised families across the UK. The study looked at intergenerational planning and wealth transfer between advised families amid the financial volatility and insecurity of the pandemic. It found that over 60% now care more about the environment and the planet than they did pre-pandemic.
Brief: After a tumultuous year brought on by the pandemic, the real estate market is showing some signs of recovery — albeit slowly, with sharp contrasts between sectors. On the whole: In 2020, the aggregate capital raised by North America-focused private real estate funds fell 26 percent from 2019, according to a Preqin U.S. real estate markets report published on Monday. For 2021, data gathered to April showed the total value of private equity real estate deals was equivalent to nearly 30 percent of last year’s total; though there may be an uptick during the latter half of the year, according to the report. The country’s residential real estate sector has seen the most activity so far this year, totaling $17 billion in deals during the first four months of 2021 — partly due to the shift to remote working with people migrating to warmer and less expensive cities. The new homeworking trends, including the shift to less urban areas, are “already shaping investor demand and city rankings in terms of invested capital.” Some pension funds have already raised their target real estate allocation in the past year. As companies introduce hybrid working options — where employees can work from home for part of the week — flexible working could continue to drive location decisions. The eventual return to the office will require less space and therefore produce a smaller demand for office real estate, according to the report.