Pivotal Point of View – April 2020

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Observations:

  • Hedge fund performance continued to exhibit significant dispersion of returns in April. To wit, based on the 2,000+ managers we track, top quartile performers are up 11.6% YTD, while those in the bottom quartile have returned -17.5% YTD.

  • We recently added two proprietary customized baskets to our research platform, PivotalBase: the PivotalPath Social Distance Winners Basket and the PivotalPath Social Distance Losers Basket. The Winners are companies that should benefit from working/staying at home. The Losers are companies that depend on people to travel and leave their homes. The research team is currently working on a piece that explains how equity long/short funds have been selling the Winners as they have rallied while holding onto the Losers in hopes of a future recovery. This was especially true in April, as beta led quality.

  • We are thrilled to announce our research partnership with the Institute for Private Capital (IPC). Launched by UNC Kenan-Flagler, IPC focuses on the intersection of public and private markets. This research partnership between IPC and PivotalPath marks an important step in expanding the availability of high-quality hedge fund indices for academic researchers, and the ability to co-author valuable research.

  • Both funds and allocators continue to adapt to manager conferences and meetings in a remote, COVID-19 world. The PivotalPath research team had planned to attend the annual Goldman Sachs Emerging Managers Conference earlier this year, typically an invaluable forum for meeting and evaluating pre-launch and newly launched funds. Despite the event’s cancellation, PivotalPath’s research team conducted 25 virtual manager meetings, and posted those notes and marketing materials, along with our peer group analysis, to recreate much of the conference’s benefits for our clients. For investors, this substitution has had the added benefit of allowing for more in-depth conversations with participating managers.

  • In the midst of the COVID-19 pandemic, many investors continue to state they will not allocate capital to any new manager without looking them directly in the eye from < 6 ft. away. We believe allocators will need to adapt, finding alternatives to supplement their existing research process, both now and in the future. This notion has been covered by other industry members as well: Shadmoor Advisors has a thoughtful piece on remote ODD available here and Institutional Investor recently published an opinion piece positing ways to replicate the benefits of onsite meetings, without the risks.

For access to performance data, our proprietary alpha rankings and additional commentary, please download the full report.

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