Investment Velocity

Investment Velocity: Hedge Fund Accelerates Into Zero Hedge Top 5 Percent

Business

What’s past is prologue, Shakespeare wrote in The Tempest. It’s sound financial advice for every investor, from the middle-class family with a small portfolio to the high-end investor seeking aggressive growth and broad diversification.

When it comes to investment savvy, success is often measured by the lists compiled by premier financial publications. These types of lists are especially important in understanding the track records of firms that specialize in complex investments, ranging from derivatives and private capital to hedge funds.

With Zero Hedge, the final tally in its “Best And Worst Hedge Funds Of 2022 piqued interest in Toronto-based Anson Funds. Investors and institutions knew Anson Funds well, but for many others the Canadian firm had been off the radar. That changed when Anson Funds landed on the list’s “top 5 percent” and was described by the online site as a consistent performer.

Zero Hedge wrote: “What we find most impressive, is not so much the fund’s 2022 return  (where it’s 7.6% return still made the top 5%-ile of all funds for the year) but its performance in the prior two years, when it posted 40%+ profits in both 2020 and 2021. Just as remarkable: in its 15-year history, the fund has had just one down year … allowing it to generate a 800% total return since 2007.”

For context, the Zero Hedge analysts noted that during the same 15-year period, the Dow Jones industrials rose 263.6% and the S&P 500 increased 249.4%. Meanwhile, returns for the average hedge fund edged lower in 2022. In large part this was because many funds were long on tech, a sector that featured what Zero Hedge termed “some truly spectacular implosions.”

As Reuters reported in a year-end recap of hedge fund performance: “Bets against electric-vehicle maker Tesla led the pack in terms of dollar gains, with investors seeing $15 billion in realized and unrealized profits on some $19.3 billion of shares sold short. Shares of the electric carmaker, whose meteoric rally over the last few years has burned many bearish investors, are down roughly 60% year-to-date.”

Anson Funds was on the right side of bets in this space, with a well-researched short position with Rivian, an EV manufacturer which has seen its stock fall from its IPO high of $129.95 in November of 2021 to less than $20 today.

According to Reuters, investors also profited with short positions in Amazon, Meta Platforms, Apple and Carvana last year.

The key to investment success for Anson Funds and other winning hedge funds was an ability to look beyond numbers on a balance sheet to see emerging trends and trajectories. Zero Hedge noted: “Among [Anson Funds’] short positions are what it dubs ‘Retail momentum and stock promotion,’ as well as high valuation on poor businesses or fads, and companies that exhibit fraudulent behavior, while longs are companies with strong secular tailwinds, as well as positive price momentum and attractive valuations.”