October 14, 2019

Gold Helps Hedge Funds During August Turmoil In Equities

Gold helps hedge funds during global turmoil in equitiesBloomberg reports that record gold prices propped up hedge funds during August’s rout in global equities.

Hedge funds run by Orix Investment Corp., Superfund and Four Elements Capital Management Pte benefited from the surge in gold last month, weathering the U.S. sovereign downgrade and Europe’s deepening debt crisis.

The Orix Commodities Fund, which uses computer programs to search for price signals in futures markets, gained 3.5 percent in August, while Superfund Blue Gold, which invests in global equities and tracks the bullion price, jumped 13.45 percent, the firms said. Gold investments in the Earth Element Fund, run by former commodity traders at BNP Paribas (BNP) and JPMorgan Chase & Co. (JPM), returned 1 percent, helping trim losses in the fund.

Gold surpassed $1,900 an ounce for the first time in August as investors sought protection for their wealth on concerns that global economic growth is slowing. The Eurekahedge Hedge Fund Index lost 1.9 percent in August and the MSCI World Index slid 7.3 percent, their worst month since May 2010.

“Gold has become a very volatile asset class so if you’re good at trading through the volatility you can profit from it,” said Peter Douglas, principal of Singapore-based GFIA Pte, which advises investors seeking to allocate money to hedge funds and runs a wealth-management business.

Gold Hedge

Bullion is up 32 percent this year, outperforming global stocks, commodities and Treasuries as investors seek to diversify away from equities and some currencies, and central banks add to their reserves for the first time in a generation. Holdings in exchange-traded products reached a record 2,216.756 tons on Aug. 8.

Gold is in the 11th year of a bull market, the longest winning streak since at least 1920 and reached a record $1,921.15 an ounce on Sept. 6. After reaching $1,913.50 an ounce on Aug. 23, the metal suffered its biggest drop since February 2010. It recently traded at $1,846.25 an ounce.

Continuing to be overweight gold, or holding more bullion relative to benchmarks, to boost performance might not be prudent, said Satoko Koshida, founding partner of KTOs Capital Partners Co., a Tokyo-based hedge fund.

“Betting on gold only just because the mandate allows you to do so may be too risky,” Koshida said. “If you are looking for a mid-to-long-term gain, you should be diversifying your assets; after all, gold is just one of many asset classes.”



  1. At least spell Bloomberg correctly…

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