Hedge Fund Anson Goes Big on Retail Trades, Outperforming Peers

Canadian hedge fund Anson Funds, which returned more than double the S&P 500 in 2020, recommends skipping the fundamentals and focusing on sentiment as retail traders take an outsized role in the market.

That is what pushed Anson to trade on themes and stocks popular with individual investors last year, including positions in Apollo Healthcare Corp., Genius Brands International Inc. and Hertz Global Holdings Inc.

Those investments helped drive it to a 44% gain last year, bringing its total assets under management to C$1.2 billion ($944 million). By comparison, the S&P 500 returned 18% while peers in the Scotiabank Canadian Hedge Fund Index, which tracks funds that manage at least C$15 million, added 6.2%.

“People have to understand stocks don’t really move on fundamentals in the short term, rather they move on the sentiment,” Anson Chief Investment Officer and Co-Founder Moez Kassam said in an interview. “A whole new class of investors has emerged, empowered by new technology platforms such as Robinhood and becoming significant drivers of the excitement in the market.”

Anson’s year-end letter to investors said it was able to spot the emergence of retail trends in 2020 and strategize around them, contributing to the fund’s performance. Investments in special purpose acquisition companies, or SPACs, also contributed.

Outside of its short position in Hertz, however, Anson’s strategy of shorting companies was less successful in 2020. The stock market’s rally made for a challenging environment even before traders on Reddit began targeted short squeezes. The fund has downsized its short positions, but says it remains ready for opportunities.

“The same dynamics that are presently driving markets and individual company valuations to record levels are setting the stage for an eventual correction that will once again make a short strategy profitable,” Kassam said. In the meantime, he plans to do what has worked well in the past: “Being both opportunistic and reactive.”

Read more: Retail Trading Mania Has EU Markets Cop Fretting About Bubbles

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