For allocators evaluating hedge fund performance, context matters.
Pivotal Points:
Pivotal Point In Time: Tariffs unnerved markets, managers took a bearish tilt, while allocators maintained their strong interest in fresh hedge fund investments.
- The economic storm of tariffs, trade wars and real wars sought to constrict market confidence in February. The PivotalPath Composite Index was down 0.2%, a long way from its robust start to the year, when it ended January up 1.6%.
- However, Composite performance still easily bested the Nasdaq (3.97%), Russell 2000 (5.45%), S&P 500 (1.30%) and Dow Jones Industrial Average (1.58%) who were all significantly more depressed across the month.
- The fall of major US markets told a rather counterintuitive story of the economies potentially most impacted by tariffs (Europe and China) holding their nerve through the month, while the source of the threats (US) looked more vulnerable.
- One manager told us: “It’s ironic that US markets took the external threat of DeepSeek in their stride, but a measure designed by a US administration to create growth is currently having the opposite impact.”
- This was particularly noticeable in PivotalPath’s equity sub indices where European and Asia focused funds outstripped their US peers. In February, the PivotalPath Equity Diversified:U.S. Long/Short Index was down 1.2% versus the PivotalPath Equity Diversified:Europe Long/Short Index at 0.4% and the PivotalPath Equity Diversified:Asia Long/Short Index at 2.1%.
- Investors began to ask questions about a decade of US exceptionalism starting to show some distinctly unexceptional traits, including over-valuation, concentration risks and some wider economic wobbles, including declining consumer confidence.
- While equity specialists had a hard path to navigate, macro managers held onto their gains, with the Macro Index ending the month up 0.1%, with a YTD of 1.9%.
- As stated before, President Trump remains a positive force for macro specialists, giving them a chance to get on the right side of a renewed era of currency volatility.
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