Hedge Fund News

Hedge funds bet against power and pile into materials

Global hedge funds offloaded U.S. electric and water utility stocks at their fastest pace in two months, while ramping up purchases of U.S. materials stocks, including chemicals, metals, mining, paper, and forest products, during the week ending Friday, according to a Goldman Sachs report . U.S. utilities stocks have become one of the most sold sectors in November, according to a note from Goldman Sachs' prime brokerage shared with investors on Friday and reviewed by Reuters on Monday.

The Dow Jones Utility Index (.DJU), which tracks U.S. utility stocks, rose over 3% last week and has climbed more than 20% in 2024. Despite the broader utility sector's recent gains, most electric and water utility stocks were sold off, with gas utilities being a notable exception, the note revealed. Meanwhile, materials emerged as the most net-bought U.S. stock sector at Goldman Sachs' trading desk last week. The buying activity spanned the entire sector, with chemicals leading the purchases, followed by metals and mining, as well as paper and forest products.

An S&P index tracking U.S. materials stocks rose 1% in the week ending Friday and is up over 9% year-to-date in 2024. Hedge funds have increased their holdings in materials stocks in three of the past four weeks, making it one of the most net-bought sectors in the U.S., Goldman Sachs noted.

Redwood plans $2.25bn credit fund amid distressed debt challenges

Redwood Capital Management, a $9.4 billion credit-focused hedge fund, plans to raise $2.25 billion for a new distressed debt drawdown fund, Bloomberg reports. The fund will target distressed and special situation investments, building on the success of Redwood’s previous drawdown fund, which delivered a 31.6% net IRR in 2023 and 17.4% since its 2021 launch.

The firm plans larger investments in the new fund to gain influence in restructuring negotiations and combat rising “adversarial creditor transactions.” Co-CIO Ruben Kliksberg emphasized the importance of holding significant positions to “defend our rights and influence outcomes.”

Despite distressed assets near 2023 lows, with $500 billion globally, distressed-debt hedge funds have seen strong performance, averaging 11.1% returns this year, per PivotalPath. Redwood’s flagship fund reported a 16.2% net return year-to-date, while its $2.4 billion opportunity fund achieved 12.5%. The new fund is set to close by June 16, 2025, with investments beginning shortly after.

Trump picks ‘brilliant’ hedge fund exec as Treasury Secretary

President elect Donald Trump has nominated Scott Bessent, founder of hedge fund Key Square Group, as Treasury secretary, signaling his preference for a seasoned financial expert and ally to lead U.S. fiscal policy, according to reports .

Bessent, 62, previously described by Trump as “brilliant,” emerged as a top contender alongside former Fed Governor Kevin Warsh and private equity executive Marc Rowan. Trump praised Bessent’s alignment with his economic vision, emphasizing tariffs, deregulation, and energy independence.

Bessent’s Key Square Group launched in 2015 with $4.5 billion, backed by George Soros, but its assets under management have since declined significantly. Despite challenges, the firm rebounded with strong returns in 2023 and 2024 and has diversified into advisory services.

As Treasury secretary, Bessent will tackle a growing $36 trillion national debt, rising deficits, and fiscal policy challenges, succeeding Janet Yellen in overseeing U.S. economic strategy.