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Market swings leave high-profile stockpickers wrongfooted

The painful start to the year for global equities has knocked out the performance of many star exchanges, with Facebook mother Meta’s disappointing results this week exacerbating the pain in some technology stocks.

Among those suffering major losses is William Danoff. His Fidelity Contrafund of 131 billion. The USD – one of the investment industry’s largest traditional, actively managed equity funds – fell by more than 11 percent for 2022 at the close of Thursday, after shares of Facebook owner Meta, its biggest bet, fell by a quarter in a single day.

Large stock pickers have mostly had a painful 2022. Chart showing year-to-date returns up to February 3 (%) and the value of assets under management ($ billion)

Technology stocks have been under pressure since last year, when growing fears of central banks reversing their stimulus policies triggered ructions across financial markets. In 2022, central banks led by the US Federal Reserve have strengthened their willingness to raise interest rates, triggering a broader divestment that has pushed the MSCI World Index of Global Equities down 5.1 percent.

“The main source of volatility is the Fed, which is beating stock markets with the prospect of a tighter monetary policy,” said Ed Yardeni of Yardeni Research.

“The Fed is making a tough transition from easy to tight monetary policy more painful and possibly more protracted than it needs to be. We anticipate that ‘the battles will continue until morale improves’, as they say.”

The gloom has hit some of the industry’s biggest names. At British money manager Baillie Gifford, Tom Slater’s £ 15.2 billion Scottish Mortgage Trust has now fallen 21 percent in 2022, its worst return since the 2008 financial crisis.

Capital Groups $ 292 billion. The Growth Fund of America, run by a 13-man team of the U.S. asset manager’s top portfolio managers, has fallen 12 percent this year. It is a sharp setback for the world’s largest active equity fund, which has had an average annual return of almost 14 percent since its inception in 1973.

Bond funds have largely lost money this year.  Chart showing year-to-date returns up to February 3 (%) and the value of assets under management (USD billion)

The stock markets had earlier this week begun to regain their foothold after a turbulent January, until Meta reported disappointing numbers on Wednesday night. It removed more than $ 230 billion from market value and triggered yet another turbulence for many technology stocks.

“The wildest of the wild favorites [in the stock market] may start to roll over, ”wrote Paul Singer, head of Elliott Management, in a recent letter to investors seen by the Financial Times.

Fundsmith, the prominent investment fund of 26 billion. The pound, managed by UK stock selector Terry Smith, has now fallen 10.8 per cent in 2022, according to Refinitiv data after heavy losses on Meta and PayPal.

Large, actively managed funds at T Rowe Price, Invesco and Poland Capital were also caught by Meta’s stock price collapse and the consequent tech stock sale, which sent the Nasdaq Composite index down 3.7 percent on Thursday and pushed this year’s losses to 10 percent . despite a recovery Friday.

“Technical stock pickers had a terrible 2021 and an even worse January,” said Andrew Beer of investment firm Dynamic Beta Investments.

The “technical wreck” has not been consistent, with companies like Apple, Microsoft and more recently Amazon reporting better-than-expected results that helped lift their shares. In some cases, this has eased the battle for stock pickers, with Danoffs Contrafund also investing heavily in Amazon, Microsoft, Apple and Warren Buffett’s Berkshire Hathaway, one of the few stocks to achieve gains in 2022.

Stockpicking of hedge funds focusing on “growth” stocks lost an average of 3.7 percent in January, according to data group HFR, their largest monthly loss since the start of the coronavirus pandemic in March 2020, while hedge funds lost 1 overall. 5 percent. However, the wild nature of the market fluctuations meant that some large managers suffered much greater declines.

Maverick Capital’s Lee Ainslie – a so-called “Tiger youngster” who previously worked for Julian Robertson’s Tiger Management – lost 21.2 percent in the month to January 28, according to figures sent to investors. Fellow Steve Mandel’s Lone Pine fell 11.9 percent for the month, according to a person familiar with its performance. Maverick did not respond to a request for comment. Lone Pine declined to comment.

BlackRock’s Alister Hibbert, one of the firm’s best-performing hedge fund managers, lost about 9 percent in its Strategic Equity fund last month, one of its worst months ever, after suffering losses in some of its more defensive stocks, said people who had seen the numbers. BlackRock declined to comment.

For some more bearish managers, market declines provide a long-awaited justification. Odey Asset Management’s Crispin Odey, which has long predicted rising inflation, got 23.5 percent in its European fund last month as one of the industry’s best results, according to figures sent to investors, helped by bets against British government bonds and against equities. Colleague James Hanbury, meanwhile, gained 9.6 percent in his LF Brook Absolute Return fund. Odey declined to comment.

Argonaut Capital’s chief investment officer Barry Norris, who has predicted a bear market, made up 5.5 percent last month. “There is not much coverage [by other hedge funds], “he said.” Many hedge funds have been created [index trackers] with a performance fee. “

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