Home Hedge Funds Hedge Fund Outlook H2 2024 | Amundi Asset Management

Hedge Fund Outlook H2 2024 | Amundi Asset Management

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Hedge Funds (HF) are up 4.2% year-to-date as of March 2024, which compares well with diversified global allocations, including 40/60 Equity/Bond portfolios which are up around +2.2% and have higher volatility. HF performance year-to-date was led by CTAs, EM focused and L/S Equity both Directional and Neutral. Overall, the HF industry continued to produce very strong alpha, up an estimated 6%+ y/y.

Markets have been switching from one goldilocks to another in 2024, and prepare for more fragmentation going forward

Late last year, markets had been pricing in that growth would slow enough to bring inflation down, leading central banks to start a full easing cycle, thus boosting risky assets. Since January, amid evidence of more resilient world growth, markets have priced in stickier inflation as well as delayed and shallower monetary easing. In other words, investors have retraced last year’s overly optimistic inflation and easing expectations, and overly pessimistic growth projections.

As consumption continues to defy expectations in the US amid ample global liquidity, inflation is now feared to be stalling, potentially leading the Fed to let nominal rates rise until both US consumption and global liquidity break, which would then put more pressure on dollar assets. Whether inflation is fuelled by strong demand, tight domestic supply or an external supply shock, it will likely determine the fate of cyclical assets. Beyond US exceptionalism, a more contrasting growth/inflation mix abroad could make room for more economic, monetary and market dispersion – once the initial contagion is overcome.

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