So where do we go from here? As most investors have been caught offsides at some or multiple points over the past eight months, the impulse to do little is understandable. We are of a contrary view that volatility is bringing excellent opportunities, some of which we discuss below. We believe that the past few months of increasing complexity are here to stay and now is a more important time than ever to employ active portfolio management to take advantage of this volatility. There is no doubt that we are in the first innings of a washout in hedge funds and certain strategies.
Long-time readers know that I’m a big fan of Dan Loeb (Third Point) and his investor commentary. He’s razor-sharp and says what he thinks. You can read the entire letter to his investors at the link above.
About a thousand hedge funds closed their doors last year and almost all of the name-brand big funds have started off the year with huge losses or redemptions or both. The fact that Loeb thinks it is only the first innings of this is telling. You can get some more context here: