The global pandemic continues to sap money from the economy at an alarming rate. While the stock market continues to experience heightened volatility, dependent investment vehicles are seeing record losses. Struggling hedge funds are drooping into double-digit losses as a result of the unexpected bear market. The coronavirus spread was initially slow to reach the United States, compared to other areas of the world. This led to many across Washington D.C. and Wall Street to downplay the potential impacts of the virus. As a result, investment firms were caught out of position when the virus spread quickly across the U.S., resulting in a stock market crash.
As of April 6th, over 60,000 people have died to the virus across the globe. In the United States alone, 10,000 have died. Due to the exponentially infectious nature of COVID-19, 1,344 of those deaths occurred in the past 24 hours. Beyond even the direct impact to nearly every industry, the situation creates a high level of unease and confusion. The befuddled response of the federal government only serves to amplify these concerns.
Glenview Capital Management Down 30%
As a case of direct impact, Glenview Capital Management saw a 30% drop during the first quarter of 2020. Glenview traditionally invested in “stable” industries that offered a consistent rate of return. Unfortunately, this includes a large swath of healthcare and healthcare-related companies. Their health-heavy portfolio understandably fell over the course of the pandemic.
The sudden torrent of COVID patients taxed hospitals around the country. As emergency cases fill hospitals – and created infection hotspots – most hospitals are outright refusing to perform elective surgeries. Without these more expensive procedures, revenue is down – a fact that disproportionately impacts Glenview.
Renaissance Technologies Hedge Fund Down 17%
Quant trading pioneer Renaissance Technologies suffers from a different affliction. Quantitative or “quant” trading is highly dependent on predicting minute patterns in the market. Notoriously secretive about their algorithms, Renaissance Technologies strategy consistently nets them an above-average return. In fact, Renaissance Technologies is widely considered to be among to be among top hedge funds in the market.
The coronavirus crash did not factor into those algorithms, just as it caught the rest of the Street off-guard. The Renaissance Institutional Equities Fund posted 17% losses on Friday. In addition, their Renaissance Institutional Diversified Alpha lost 13%. While they may be able to mitigate the crisis, Renaissance Technology’s trading strategy may be in for longer-term volatility, as the pandemic and its related uncertainty continues to rage on.
Article By: Adam Stone