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Hedge fund update – Q1 2020
11/04/2020
Hedge fund update – Q1 2020
My hedge fund was finally put to the test over the past quarter. Could it avoid the stock market collapse?

Back in 2017, my investment portfolio consisted mostly of index ETFs. The stock markets were going higher and higher, and I became increasingly concerned about an imminent downwards correction.

I decided to sell my ETFs and join a hedge fund, which had been recommended to me a few months prior. Beyond the attractive annual returns, the fund’s main selling point was their proven ability to avoid stock market collapses. In fact, they claimed to had made a profit in 2008!

The next serious crisis took some years to arrive, but when it did, it hit hard. The global pandemic caused stocks to plummet all around the world. Even after the recent upwards correction, the S&P finished Q1 20% lower than it had been at the beginning of the year.

Naturally, I was very anxious to see how my hedge fund fared in comparison. When the quarterly report came, I was not disappointed:

In truth, this particular crisis wasn’t very difficult to predict after the initial outbreak. While 6.21% quarterly return seems amazing, it was actually possible to earn more by shorting the S&P index. Not that I’m complaining! But market outlook looks a lot more fuzzy from now on, and this may prove a bigger challenge for the hedge fund.

For now I can only rejoice in last quarter’s profits, which have given me the better starting position coming into this quarter. As for speculations regarding the economic impact of CoViD-19… I’ll leave those for the Plague Diaries post series. Stay tuned.

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