Time For Active Managers To Prove Their Worth

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Time For Active Managers To Prove Their Worth

Interview with Cowen’s Jack Seibald, Co-Head of Global Prime Brokerage & Outsourced Trading – Reprinted with permission from Hedgeweek

While hedge funds struggled in Q4, so did passive investments. Could higher volatility in 2019 help active stock pickers shine?

The fourth quarter of 2018 culminated in a substantial market correction. Everywhere one looked, it was a sea of red. Far from bringing festive cheer, on Christmas Eve both the Dow Jones and S&P 500 fell 2.5 per cent before a rapid rebound a couple of days later.  At one point the Dow was down 18.8 percent from its October high, while the S&P had fallen 19.8 per cent.

Volatility is often the friend to hedge funds, historically, as market corrections are precisely when active managers can demonstrate their alpha generating capabilities; and by inference, not hide behind market beta in a trending bull market.  But Q4 proved a challenge for hedge funds, with some high profile names enduring a terrible year.

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