Hedge fund sentiment holds strong despite recessionary fears

Yahoo Finance’s Alexandra Semenova joins the Live show to discuss confidence among hedge funds despite market volatility and economic concerns.

Video transcript

JULIE HYMAN: Well, we have been watching the consumer confidence measures, close to a decade low. Corporate America bracing for recession. There is one area where sentiment is still positive, it's at hedge funds. Let's bring in Yahoo Finance's Alexandra Semenova who's been looking at this. Kind of interesting here. What are you hearing?

ALEXANDRA SEMENOVA: Yeah, definitely. So we've obviously heard a lot of different perspectives on the economic outlook and the consensus seems to be that we are preparing for a recession. But hedge funds don't appear to share that pessimism, that's according to the Alternative Investment Management Association's Hedge Fund Confidence Index, which measures the economic prospects of hedge funds. They interviewed about 360 investment managers.

And the index came in pretty upbeat, all things considered, which is incredibly interesting because not only does it come as everyone else is talking about an economic downturn and as stocks posted the worst start to the year in decades, but also during a wild quarter for hedge funds.

Notably, we saw Tiger Global shed more than 50% this year. And Melvin Capital, which was obviously the villain in the GameStop saga, completely closed its shop. It was previously one of the best performing hedge funds on Wall Street.

BRIAN SOZZI: How did confidence levels look different by different strategy?

ALEXANDRA SEMENOVA: Yeah, it's certainly varied a lot by strategy. Global macro strategies performed the best. Obviously, they capitalize on market dislocations and on global and macroeconomic disruptions. So they had a very strong quarter and confidence levels were highest there. But then you take a look at crypto hedge funds, which unsurprisingly, had the lowest confidence level given, you know, everything that happened during the quarter with cryptocurrencies and digital assets.

BRAD SMITH: And so what kind of success in their portfolios are they looking for as we move into the second half of the year, perhaps here?

ALEXANDRA SEMENOVA: Well, global macro hedge funds are the ones to keep an eye on. A new report just came out today saying that they saw the most fund launches during the quarter in a very long time, capitalizing on inflation and everything that's going on with the economy. So that's gonna be a category to look out for in coming months.

JULIE HYMAN: Man, who's still paying 2 and 20 in this environment? I guess they're not all still charging 2 and 20, but still.

ALEXANDRA SEMENOVA: Yeah, a lot of them are cutting their fees because of the performance that they're experiencing.

JULIE HYMAN: They would have to.

ALEXANDRA SEMENOVA: Yeah.

BRAD SMITH: Yeah, really.

JULIE HYMAN: All right, thanks so much, Alex. Appreciate it.