COVID 19 Calamity Continues, How is the Hedge Fund Industry Placed?

If you’ve seen the World War Z movie or read the book, you would recall Max Brooks’ dialogue-

Something similar happened while you were celebrating new year eve 2020- the World Health Organization (WHO) was acquainted with a peculiar case of pneumonia, which later went on to evolve as a pandemic!

Currently, fear has become the most valuable commodity of our universe, being traded more than goods and services. Thanks to the current trade restrictions, countries are sharing emotions more than economic and business activities. The sum of all our blood, sweat, and tears has been amounting to zero with a pandemic engulfing us all in its treacherous realm.

GOOD READ- COVID 19 Intensifying- Bleak & Bright Side, US Stock Worries Persist

Hedge Fund Amid Pandemic

Hedge funds are investment options that pool in capital from accredited investors or institutional investors and invests in a variety of assets based on diversified complex strategies. They have garnered interest as they are believed to face lesserregulatory pressure relative to mutual funds and other investment avenues.

History has proved (and we are referring to the Global Financial Crisis of 2007-08) that hedgefund managers are prone to come under pressure during market crashes.

Several economists are predicting similar worst times for the industry amidst virus outbreak.Moreover, with restrictions on short selling, hedge funds' ability to profit from falling markets may potentially get limited.

Amid the ongoing pandemic, while the hedge fund industry’s assets under management can face a temporary decline,a shift to video technology seems likely.

Technology has been a boon to hedge fund managers and investors alike, and is of utmost importance amid the COVID 19 crisis. The search and investment process primarily performed in person or through word of mouth is now aimed at being managed at the comfort of one's computer screen- thanks to hedge fund database and analysis platforms, web sites, web meetings and teleconferencing.

Currently, hedge funds are engaged in convincing investors regarding the unique investment opportunities, depending on their take of the market and risk appetite.Some are hopeful of their strategies to yield good returns with the market bouncing back with government stimulus and central bank’s quantitative easing across the world.

Reportedly, hedge funds have lost billions of dollars owing to the COVID 19 market nervousness, struggling to find potentially profitable bets and positive investors.

You will now wonder- but where is the hedge in hedge funds?

Well, they can be cheaply available in bear markets. Moreover, the hedge part of these funds is bound to appear when the market storm subsides and could be more profitable in regions of distressed debt funds.

COVID 19- Current Stance of the Pandemic

With its epicentre in Wuhan City of China, COVID 19 has spread its vicious poison in over 200 countries of the world, while medical science’s capability to introduce a robust vaccine remains a test that its struggling to pass.

Let us graze at some recent figures, sourced from the WHO& a JHU CSSE Dashboard as on 28 March 2020-

Having said this, there are mixed updates on the virus and the plague it is spreading from various realms of our lives. Let us get a brief understanding of both, in the next section-

COVID-19- Fearsome Facts

In a recent media briefing, WHO’s Director-General Dr.Tedros Adhanom Ghebreyesus stated that the core problem of the virus can only be solved with international cooperation and international solidarity. Below are some areas where virus seems to be having its cruel control-

• Stocks markets have been volatile, exhibiting a selloff spree hinting bear market scenario
• Economies continue facing unprecedented war time measures- lockdowns, self-isolation, social distancing and quarantine procedures
• Restrictions are hampering businesses and trade relations across the globe
• In a recent press briefing post a conference call of the International Monetary and Financial Committee (IMFC), International Monetary Fund (IMF) Managing Director, Ms. Kristalina Georgieva indicated that the world is heading towards a recession, primarily driven by the pandemic
• According to the World Bank, global growth is projected at 2.5 per cent in 2020
• A vaccine is still at least 12 to 18 months away

COVID 19- Hopeful Hallows

Amid the bleakness, there have been some developments that are keeping people hopeful. As stated by Dr.Tedros, we have faced a lot of crises in the past, and we have overcome them all, we need to remain hopeful that we will overcome COVID 19 as well. How, when and to what extent remains a question only time will tell.

• After equipping 74 countries with necessary protective gear, the WHO is all set to send around 2 million individual items to 60 other countries.
• Over 45 countries are diligently contributing to a Solidarity Trial conducted by WHO, that will assist in comparing the safety and effectiveness of four different drugs or drug combinations against the virus.
• Medical tests and trials across the world are ongoing at full capacity
• Even now, approximately 150 countries and territories still have fewer than 100 virus cases.
• Economies have been taking regulatory measures seriously as directed by the governments.
• A JHU CSSE dashboard verifies that across the world, there have been more than 131.7k patient recoveries.
• Governments (like the US, Australia and India ones) have been declaring stimulus packages for their respective economies (USD 2 trillion, $ 189 billion and ~ USD 2.1 billion, correspondingly) to help counter attack COVID 19 hues.
• Global stock exchanges have been delivering mixed results at the end of trade sessions and investor sentiment has been seen to built positively too amid crisis, at the back of government and business attempts.

As you would have noticed, the good points are clearing competing with the bleak ones. So, let’s remain hopeful that lives will spring back to normalcy in the days to come.

In closing, we would like to quote Dr. Tedros-