Riding the waves of dispersion
Friday, 07/11/2025Global markets saw mixed but ultimately positive performance in H1. January opened strong, driven by policy shifts and gains in energy, healthcare, and European equities. February and March were volatile as trade tariff concerns weighed on sentiment, with US tech leading losses and growth stocks sharply underperforming value. Interest rates fell globally early in the period, except for the US where the Dollar fluctuated, and commodities were mixed. April brought heightened volatility but improved sentiment by month-end, with renewed optimism around trade negotiations and potential rate cuts. May saw a strong rebound, led by technology and improving global growth prospects, with Germany and Japan topping regional equity gains. Overall, risk appetite recovered heading into summer.
Hedge funds were decidedly resilient in a fast-moving geopolitical environment during the first half of the year, with performance led by Equity Long/Short strategies particularly in January, May and June driven by strong returns in fundamental growth, value, and market neutral exposures across US and European equities. Relative Value strategies posted steady gains, supported by convertible arbitrage and US stable rate conditions. Event Driven managers performed consistently, with merger arbitrage and special situations benefitting from ongoing M&A activity and supportive equity markets. Multi-strategy funds were mixed, facing early struggles in February and March before stabilizing. Macro/CTA strategies underperformed, with losses concentrated in systematic trend-following amid volatile currency and commodity markets. Despite some dispersion and mid- quarter volatility, hedge funds overall navigated a shifting macro environment with positive but uneven results.
Our own uncorrelated hedge fund portfolios followed a similar pattern however substantially outperforming the industry indices. In crypto space, an increase in institutional participation relative to retail curtailed opportunities stumping performance somewhat.
At the end of this letter, we will focus on an emerging opportunity in South Korea following the election of a new president focused on corporate governance and new economic policies.
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