For the year ended June 30, the S&P 500 Total Return Index was down 10.6% and the Bloomberg U.S. Aggregate Bond Index was down 10.3%, while the S&P 500 Total Return Index was down 20% for the year to June 30, Bloomberg U.S. Aggregate The bond index fell 10.3%.
Joe Dowling, senior managing director and global head of Blackstone Alternative Asset Management LP in New York, said the paradigm shift from a 10-year stock outperformance to the worst first half since 1970 is unnerving asset owners.
“The real dilemma for CIOs is, what do you do when bonds and stocks are correlated and both are negative?” Mr. Dowling added.
He stressed that “we are still in the first innings of the first mover” regarding increased investment by hedge funds, noting that the pace of hiring could increase through the end of the year and into 2023.
As of June 30, BAAM had $80.1 billion under management, of which about $50 billion was managed by hedge funds and the rest by other alternative strategies.
BAAM’s net inflows into hedge funds and other alternative strategies totaled $2 billion in the quarter ended June 30, compared with $4 billion in the previous quarter, according to parent company Blackstone Inc.’s earnings report.
As of June 30, Blackstone’s total assets under management were $940.8 billion.
With the current correlation between equities and fixed income, portfolio diversification is critical as institutional investors seek out some of the uncorrelated hedge funds can offer, said Victoria Vodolazschi, director of investment and hedge fund research at Willis Towers Watson PLC in New York. Strategy.
“Many hedge funds have underperformed this year and are closely tied to the market,” she said. Vodolazschi said, noting that investors and their hedge fund managers are adding low-correlation strategies to their portfolios, including discretionary and systematic macro strategies to increase diversification.
According to the HFRI Fund of Funds Composite Index, hedge funds returned -5.5% for the year ended June 30, while the HFRI Funds Weighted Composite Index fell 5.6%, according to data from Chicago-based hedge fund research firm HFR Inc.
The one-year return for the HFR Hedge Fund and Hedge Fund Portfolio Index through June 30, while negative, was much better than the S&P 500 Total Return Index and the Bloomberg U.S. Aggregate Bond Index.
Institutional investors, both large and small, have invested in fund-of-funds hedge funds in 2022, including Columbia’s South Carolina Retirement Investment Board, which in April allocated $150 million to Polymer Capital Management, a fundamentals-oriented fund , an Asia-focused equity market-neutral fund from the $38.8 billion South Carolina Retirement System.
The $1.7 billion Memphis Light, Gas and Water Division, located in Memphis, Tennessee. Invested $20 million with Pointer Management Co., a Chattanooga, Tennessee-based hedge fund manager.
In June, another small pension fund, $481 million West Palm Beach (FL), invested $10 million in ETG Co-Invest Opportunities Fund II, a family of hedge funds managed by New York-based EnTrust Global Partners LLC.