Bring the noise

It’s been a noisy start to 2021.

Just two weeks into the new year, and already the outgoing US president Donald Trump is facing an historic second impeachment trial after inciting an insurrection at the US Capitol. The spectre of coronavirus continues to loom large, pushing several countries towards grim new milestones, even as the vaccine is rolled out globally. UK exports are sinking under the weight of EU third country red tape, and bitcoin registered its biggest two-day fall in nine months earlier this week. 

The hedge fund industry last year recorded its best annual performance since the Global Financial Crisis, despite the battalion of challenges. And now 2021 is shaping up to be another eventful year for managers across the full spectrum of strategies.

The continuing fall-out from Covid-19’s economic shock is unveiling an assortment of special situations opportunities - from early-stage short positions in firms undergoing credit distress to later-stage, post-reorganisation themes comprising event-driven return catalysts such as spinoffs, M&A trades and stock buybacks. New York-based distressed investing specialist Schultze Asset Management has pinpointed a number of industries and sectors undergoing considerable distress, including energy, retail, and transportation.

Meanwhile, the digital asset universe continues to draw interest from mainstream investors and, inevitably, closer regulatory scrutiny amid talk of a bitcoin bubble. 

But publicly-listed UK hedge fund giant Man Group believes bitcoin’s volatility should be seen as part of the price discovery process in what is still a relatively new asset class, a path which may ultimately bring stability and legitimacy to the currency.

As with bitcoin, investors have kept a close eye on the performance of med-tech and pharmaceutical stocks as they have led the charge in the battle against coronavirus.  

Hedge fund strategies trading healthcare stocks ended 2020 on a high, posting a 5.25 per cent rise in December which brought their full-year gains to almost 26 per cent, according to data from Hedge Fund Research.  

Now, though, plans by Joe Biden’s new administration to reform the byzantine American healthcare system could throw a number of curveballs towards the sector, with far-reaching implications for company valuations and drug prices.

Rhenman & Partners Asset Management, the Stockholm-based healthcare hedge fund firm whose flagship strategy advanced more than 17 per cent last year, suggests the President-elect’s proposals represent “probably the most crucial issue” facing the fund in 2021.

Any faint hope that the turmoil of 2020 might have given way to a more stable economic and political environment this year seems to have been comprehensively nixed.



Hugh Leask
Editor, Hedgeweek
 

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