Hedge Funds and the crystal ball for 2015
When activist billionaire hedge fund investor Carl Icahn targeted Manitowoc (MTW) in late December, pushing to split the company’s crane and food services units, he gave Wall Street a valuable tip for 2015, expect more CEOs to be blasted for under performing. The S&P 500’s (^GSPC) sixth consecutive yearly gain is making it easier to ferret out the losers says Ken Heinz, President, Hedge Fund Research, an industry trade group. “It really opens the door for an activist to come in and make some changes.”
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Heinz predicts activism, a subset of event driven strategies, will be a big driver for the hedge fund industry in the coming months, as well as plain vanilla macro strategies. “As you see the U.S. led recovery driving a couple of things, it drives cross-border transactions, it drives tax inversion deals.”
Investors should also expect hedge funds to take advantage of plummeting oil prices, now at the $50 level. “Lower energy prices may drive some opportunities and consolidation in the energy space.” notes Heinz who expects to see a pick-up within Commodity Trading Advisors also known as CTAs.
The hedge fund industry has a lot to work with. Capital is sitting at a fresh record of nearly $3 trillion according to data from HFR. Although the pace of new funds was lackluster in 2014, Heinz argues the average size of new funds tells a better story. “You got an average size launch around $100 million, so they are getting a decent start rather than starting at $15 or $20 million.”
The question remains whether record assets and larger funds will improve hedge fund returns which averaged just 3% through November 30, as tracked by the HFRI Fund Weighted Composite Index.
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