Highlights:
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With rising rates and inflation on everyone’s mind, including our allocator clients, interest in discretionary global macro and commodities-focused managers has been picking up. These strategies have benefited from the rising rate environment and the rotation into value/cyclicals.
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Last year, PivotalPath created baskets of “Social Distance Winners” (think Zoom, Peloton, Atlassian) and “Social Distance Losers” (think Delta, Las Vegas Sands, Cinemark Holdings). In 2020, the Winners unsurprisingly outpaced the Losers, with the former up 126.7% while the Losers were down 18.5%. So far in 2021, the Losers are getting their revenge, as the Social Distance Losers basket is up 21.6% to the Winners’ 3.8%.
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TMT managers, up 4.8% in February and 1.3% YTD, trade in a space that’s been prominently featured in the media thus far this year. Given recent volatility in tech stocks, we would expect manager dispersion to be well above the long-term average of 2.5% as well. Sure enough, PivotalPath’s Dispersion Indicator clocked in at 4.7% for TMT managers in February, down from 5.8% in January but still elevated. YTD, the top performing TMT fund is up 16.6% while the bottom lost 14.6%.
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Recommended Read: The Hedge Fund Industry is Bigger (and has Performed Better) Than You Think
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Leveraging Form PF filings, this academic working paper reveals that the hedge fund industry has performed 18% better, over a 4-year period, than commercial databases reported publicly. Additionally, the industry represents $5+ trillion in capital, not $3+ trillion, a widely cited statistic. That’s a $2 trillion error, an amount in excess of the recently passed $1.9 trillion Covid relief bill.
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While monthly editions of the Pivotal Point of View largely showcase quantitative insights, we also spend significant time discussing the qualitative with our allocator clients. On that observational front, as we mark the 1-year anniversary of quarantine, our team reflected on what we miss most about being together in the office. A few standout observations below:
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Learning from each other without scheduling a time to do so
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Overhearing anything!
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A clear start and end to the workday
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Speaking (showered) face to (showered) face
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