Stone Mountain Research Perspective Vol. 48

Originally published on 20 March 2017

The first two weeks of March were marked with four major events in the financial markets. Starting with FED’s decision to raise the rates, which caused treasuries and stocks to rally, while U.S. dollar sank. Gold and oil profited from the rise in the rates and bitcoin was on the rise, continuing the momentum gained after the rejection of Winklevoss’ ETF application. U.S. regulators disapproved the launch of what would have been the first bitcoin ETF, and after the initial drop in the Bitcoin price, it returned to over $1250 level, proving that the drivers of demand are solid as it surpassed the price of an ounce of gold for the first time ever. The third event refers to Greece’s return in the headlines for a potentially new bailout, which spread few concerns among Eurozone. Finally, the Dutch elections didn’t hide any negative surprise and there is optimism spreading across other major European countries. Hedge funds realised losses in the first two weeks of March, excluding equity hedge strategies which are the only ones with positive returns. The biggest losers are systematic CTAs, with macro and event-driven strategies following right behind. The scenery is expected to revert in the second half of March, as most peoples’ expectation on FED’s decision were fulfilled. After a disappointing last year with big outflows, 2017 is forecasted to witness an increase in the asset class assets under management, mainly caused by inflows. Private debt strategies are expected to perform better after the increase in the rates, with focus on direct lending and CLOs as well as structured credit. The most significant news was Prosper, the marketplace lender, securing a $5bn funding from institutional investors. The situation in the private equity space remains stable, with dry power hitting high levels alongside competitions for “good” deals. The rise of private debt and the relatively cheap credit could take away a piece of the private equity pie, which needs to deploy more money to sustain the amazing performance of previous years. Finally, real estate is still attracting new money, with investors seeking diversification and illiquidity premium in the asset class.

Stone Mountain Capital In-House Indices vs. Major Benchmark Indices Hedge Funds and Long Only As Per YTD January 2017, Stone Mountain Capital Research

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