Some emerging hedge fund managers' reactions to the US election

Following the market dips on election day, the S&P 500, the Nasdaq Composite, the Dow Industrials and the Russell 2000 index of smaller stocks are simultaneously hitting new record highs, and bonds are selling off.

We surveyed a number of emerging hedge fund managers from around the world to find out their reactions to the post-US election market. It seems that most are gearing up for an increase in market volatility.

David Meneret, who runs a US-focused relative value credit hedge fund at New York-based Mill Hill Capital, reported more volatility in US fixed income, which is positive for his strategy as volatility tends to create dislocations across credit markets. "We watch market implied volatility very carefully and believe that uncertainty with regards to new economic measures might create more volatility in the next 12 months," he tells Opalesque.

Furthermore, the 10-yr Treasury went from 1.83% to 2.31% between election day and 22nd November - compared to a previous low of 1.36% in July. This has no doubt affected funds that were not positioned for a Trump presidency and those that were highly levered to the government bond market. "With the Government's ability to control the House and the Senate, it is possible that the Government will provide fiscal stimulus to the US economy, allowing the Fed to keep hiking interest rates in a context of less-needed Quantitative Easing and potential wages inflation," he adds.

The macro and relative value hedge fund run by Hong Kong-based Jomon Investment Management benefited from the election results. Indeed, the day after the election was its best day since inception. "Our analysis co......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.