Arguably, hedge funds have navigated well with the offensive buying initiated by the online forum against Gamestop’s short-lived stake and so-called “short squeeze” that has inflicted heavy losses on some individual players in the industry.
The average return among hedge funds fell at 4.8 per cent, the highest for the first quarter since 2006, according to financial data company Euricage. However, competitor HFR hit the 6.1 percent figure – which sums up the strongest annual start since 2000.
This could contrast with the first quarter of last year, when hedge funds fell an average of 11.6% as the world was hit by the pandemic. However, the year ended strongly and 2020 was the best for hedge funds since 2009 when the major financial crisis recovered in a similar fashion.
The return is mainly created through investments in recovering so-called value stocks. Gamestop and Archegos both contributed to the “turbocharging” returns, according to the Financial Times, by providing a clear opportunity to fall behind in fast and strong value stocks.
Aaron Smith, founder of the hedge fund, Picora Capital, told Newspaper.