Reviewing Strategy Appetite in 2024

Reviewing Strategy Appetite in 2024

In this month’s article, we have briefly reviewed some themes that we have started to see develop so far this year in relation to strategy appetite, and how this is impacting the type of talent firms are seeking out.

While 2023 may not have been a stand out year for the multi-strategy hedge fund space in terms of performance, the gains achieved in November and December, coupled with a positive start to 2024, have revitalized many managers’ appetite for top talent. Below, we will delve into how this renewed interest has manifested in strategy demand and explore the current trends shaping the landscape for 2024.

There has been a noticeable uptick in appetite for Equities as an asset class overall. Demand for talent in Fundamental Long/Short Equity strategies remains steady regardless of performance, driven by opportunistic and sector-focused coverage needs. The greatest change in demand, however, is observed in other equity-focused strategies such as Delta 1, Equity Special Situations, Macro Equity, and Equity Relative Value (ADR, AH, Event Dr., etc.).

Alongside the rise in demand for discretionary Equities strategies, there continues to be a strong appetite for systematic Equities strategies, particularly those operating at mid-frequency levels. This sustained demand underscores the strategy’s popularity throughout 2023. While there has historically been interest in quantitative Equities strategies within the systematic universe, several leading multi-strategy hedge funds have recently launched new ventures in this space, intensifying competition and making it one of the most fiercely contested strategies in the hedge fund universe.

In the fixed income/macro space, there’s a decreasing appetite for directional macro strategies across developed markets (DM). Although the general sentiment suggests that 2024 should be a strong year for macro, most firms are showing interest in relative value (RV) trading strategies. Specifically, portfolio managers focused on EU rates and GBP rates are highly sought after, as are those focused on short-term interest rates (STIR) globally. There was significant demand for Bond RV PMs after the strong performance in 2023. However, it’s now widely perceived that many teams have expanded, resulting in less available balance sheets for new PMs.

In 2024, credit strategies are receiving less attention overall, although there is still some interest in highly liquid strategies within the space. These include Long/Short Credit strategies focusing on highly tradable US Investment Grade (IG) and High Yield (HY) assets, as well as Macro Credit and Credit Relative Value (RV) strategies.

Once again, there is significant activity in the commodities space across hedge fund platforms. Established commodities businesses are actively seeking to expand their operations, while newer players are looking to incorporate this sector into their existing array of strategies. Whether it’s a new venture or an expansion, there’s a general preference for specialists over cross-commodity traders. Specifically, traders with expertise in Oil, Gas and Agricultural commodities are highly sought after.

2023 witnessed significant hiring activity across Volatility strategies, and 2024 appears poised to be equally dynamic. Despite a subpar performance year for volatility strategies by recent standards, there’s a renewed outlook across the space. This renewed optimism is reflected in the appetite for both Equity and Fixed Income strategies. In Fixed Income, demand is evident for both FX and Rates (Macro and RV), while across Equities, primary areas of interest include single stock (dispersion and non-dispersion) and index volatility.

 

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