Hedge funds are set for gains, according to Anthony Lawler, portfolio manager at Swiss asset manager, GAM.
Lawler noted that equities had resumed their impressive rally by the end of April, even though the month delivered some choppiness across markets, which supports the view that accommodative central banks and growth-focused policies are trumping concerns regarding weak fundamentals.
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Investor confidence was widespread in April as risk markets – including equities, bonds and credit – moved up, Lawler notes.
Meanwhile, some market participants were confused as to why both equities and US Treasuries were rallying in tandem: "It seemed investors did not simply rotate into riskier assets, but also invested cash into bonds, creating this unusual positive performance scenario in both so-called risk-on and risk-off assets.
Notable losers on the month were the Japanese yen, precious metals, Chinese equities and most commodity markets. Against this backdrop, hedge funds performed well in April, with the HFRX Global Hedge Fund index closing up 0.6% for the month and up 3.8% for the year-to-date.
Lawler said the biggest moves on the month came in the commodities universe, where both precious and industrial metals sold off. Gold and silver were subject to a liquidation move as inflationary fears retreated and industrial metals reacted negatively to slowing Chinese growth.
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By GlobalDataThe magnitude of these moves surprised many, said Lawler. "Gold and copper sold off hard, but broadly speaking the impact on hedge funds was very limited."
There is reason for continued cautious optimism Lawler added: "We see some excellent investment opportunities and believe this environment could continue to deliver good risk / reward trading opportunities for skilled managers.
"But we remain mindful of the fragility of the current political and policy frameworks. As such, although we are fully invested, by and large we are taking positions that are liquid and can be nimbly moved so that we can adjust if cracks form in the macro backdrop." Lawlerconcluded.
