Article by Masahiko KUMADA
Growing Stock Market and Performance
Since the COVID shock, stock markets around the world have risen significantly. Looking at the US stock market in particular, the NY Dow has risen from $18,300 (as of March 23, 2020) to $35,800 (as of December 8, 2021). This is about 95% increase. Many more participants access to the market to receive good performance.
The primary reason for this phenomenon is the inflow of funds into the stock market. This is due to the large-scale monetary easing and fiscal policies in order to avoid economic stagnation caused by COVID.
Another factor may be the increase in the number of individuals. They are participating in stock management as they spend more time working from home. During the past few years, we hear the performance of hedge funds is not as good as index management. Hedge fund management pursues profit in any environment. Moreover, they show performance that is complementary to index management through alternative management which has no correlation with stocks.
Changes in Index Management
Many of them do not use indexes as their benchmarks in the first place. There is no such thing as asking for more than 20% performance in interest rate arbitrage management, aiming for stable income in any environment. This year, there was a fund that targeted the rise in transfer fees from soccer players’ transfer trades. However, the correlation of this performance with the stock market is quite low. Investors do not expect the stock market to perform as a benchmark. According to a Bloomberg report, this year’s net hedge fund inflows are the highest since 2017.
Changes in hedge funds
Another report says that the inflows have become so large that some funds have stopped accepting new money. Every day, more and more hedge funds around the world are using new management techniques. We believe that the emergence of novel and innovative management techniques will contribute to the development of global financial markets.
Masahiko KUMADA
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