BlueBay, other hedge funds turn focus to bank, bond and oil trades under Trump
Corrects headline and first paragraph to make clear that Man Group is focused on tech, not bonds and oil
By Nell Mackenzie and Tom Westbrook
LONDON, Nov 6 (Reuters) -Hedge funds including BlueBay were turning their attentions to crude oil, U.S. Treasuries, tech and U.S. banks on Wednesday, after Donald Trump was elected president.
Trump's victory gives him a clear mandate to implement his policy agenda, which includes plans to cut U.S. corporate taxes, said Russel Matthews, lead portfolio manager of BlueBay's macro hedge fund in London, part of the $468 billion asset manager RBC Global Asset Management.
A macro hedge fund uses financial instruments to make bets on the economic health of a country.
As U.S. Treasury yields climbed to four-month highs in the wake of the election result, Matthews said he had seen "glimmers of bond vigilantism being back," in a reference to investors dumping or shorting government debt over worries about higher borrowing. A short bet expects asset values to decline.
U.S. Treasury prices fell sharply on Wednesday as yields rose - 30-year yields hit a roughly six-month high of 4.68% US30YT=RR.
"Irresponsible fiscal policies and growing debt piles - there is a point at which the market just starts to revolt against that," said Matthews.
BlueBay's hedge fund strategy as of Wednesday, was short 30-year U.S. Treasuries and long 10-year German Bunds DE10YT=RR, he said, adding the firm was long the dollar and short the euro and pound EUR=EBS, GBP=D3.
The dollar =USD was up almost 2% against a basket of currencies, and on track for its biggest one-day jump in four years.
A steeper bond yield curve might aid undervalued finance firms like Citigroup C.N, said Matein Khalid, chief investment officer of family office Phoenix Holdings in Dubai.
Banks will likely benefit from easier financial regulations on capital, risk management, asset management and mergers and acquisitions which have been floated as possible Trump policies, Khalid added.
Nick Ferres, CIO of Vantage Point Asset Management in Singapore agreed and added that Asia-Pacific banks would also benefit from growth and higher yields under Trump.
Whereas in the long run, tech stocks may fare differently, suggested Dan Taylor chief investment officer of Man Numeric, a fund within the $174.9 billion hedge fund Man Group.
The so-called "Magnificent 7" biggest tech firms, whose stocks have benefited in the last two years from positive sentiment from not only hedge funds but investors, globally might face headwinds under a Trump presidency, said Taylor.
"One would think less regulation would be good for big tech companies, but they may end up the exception if Trump and policy makers see them as too powerful and hostile to national interest," he told Reuters.
"It wouldn't be a stretch to imagine one of them being broken up. There is precedent for that in the U.S., in terms of large companies seen as pseudo monopolies getting broken up. We could see this again."
'DRILL, DRILL, DRILL'
Trump's support of the oil industry, including easing environmental regulations, could result in lower crude oil prices.
"Trump has said he will 'drill, drill, drill,' which will increase U.S. supply," said Sam Berridge, a portfolio manager at the Strategic Natural Resources Fund, a part of the larger A$7 billion ($4.61 billion) Perennial Value Management, in Perth, Australia.
"A balancing factor may be a more aggressive stance on Iran oil exports should the U.S. impose stiffer sanctions. This would be supportive for oil prices but it's difficult to say by how much as most of Iran's oil exports go to China," he said.
Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Elaine Hardcastle and David Evans
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
