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Despite the excitement on Wall Street over Donald Trump’s election victory, hedge funds are actually more likely to have the White House occupied by a Democratic president than a Republican one, according to HFR, which collated data dating back to 1991. The case is said to generate more alpha.
Compared to the S&P 500, the industry underperformed no matter who was in charge. However, during the Democratic administration, the difference was about 183 basis points, with hedge funds’ average annual return of 10.16% compared to 11.99% for the S&P 500 index. The underperformance gap during the Republican administration was 331 basis points. (1 basis point is equivalent to 0.01%.)
When compared to bond indexes, HFR finds that hedge funds affiliated with both parties outperform. Alpha was higher when a Democrat was in the White House.
Since 1991, total net worth flows have been higher under Republican administrations (about $450 billion) than under Democratic administrations (about $400 billion), even though Democrats have held the top job for six more years than Republicans. billions of dollars) was higher.
Surprisingly, the way hedge fund participants donated in elections was slightly biased toward one political party or the other. A recent report from Open Secrets found that during the 2024 election cycle, industry players donated $31 million to Democratic candidates, with almost half of that, $16 million, going to Republican candidates.
Of course, the key here is that hedge fund returns are much more correlated to their positioning relative to the performance of various asset classes than to any specific policies by the administration. Therefore, it is difficult to predict what will happen to the industry over the next four years.
Wednesday at 2pmth We need to understand how asset managers are reconfiguring their portfolios through the annual ‘Delivering Alpha’ event.
