Alternative Risk Premia (“ARP”) strategy performance has rebounded after the pandemic and stands out as a bright spot in the challenging markets of 2022, MJ Hudson research finds.
MJ Hudson has been closely monitoring the factor investing market since 2014. Continuing our series of ARP market reviews, we are pleased to announce the publication of the latest Alternative Risk Premia Report that presents an overview of industry performance to June 2022.
Key findings in the report:
- ARP performance has rebounded over the past eighteen months (since the publication of the previous MJ Hudson ARP industry report), with the average ARP fund open for investment returning 5.5% p.a. over cash since the end of 2020
- While performance remains dispersed, most of the ARP funds covered in this report outperformed both traditional stocks and bonds as well as liquid hedge funds over the observation period
- Positive ARP fund returns have coincided with improved performance of risk premia strategies offered by global investment banks. Out of the eight core ARP Strategy Composites monitored by MJ Hudson, a turn-around can be seen not just in Equity Value and Trend Following, but also in Equity Short Volatility and FX Carry strategies
- Contrary to the period 2017-2020, ARP funds and investment bank strategies have recently offered valuable diversification benefits to traditional equity/bond portfolios
- The results also suggest improved performance by ARP managers, even after controlling for their systematic exposures to traditional assets and the ARP Strategy Composites
- The nascent recovery must be seen in the context of the generally disappointing industry performance in 2017-2020. Consequently, the report notes the closure of a number of public ARP funds and generally muted investor interest in diversified ARP offerings
Odi Lahav, COO MJ Hudson explained:
“For nearly a decade, MJ Hudson Investment Advisory has provided market research in the Alternative Risk Premia space. The Alternative Risk Premia Report H1/ 2022 is designed to provide insights into this market, informing institutional investors and fund managers alike. Given the seismic changes that we’ve witnessed in the capital markets, over the last 18 months, the importance of high-quality independent research has rarely been timelier.”
Antti Suhonen, Senior Advisor at MJ Hudson and Professor of Finance at Aalto University School of Business, Helsinki added:
“It is encouraging to see the improved performance of ARP products over the past eighteen months, especially in light of the wider market environment. We have suggested in our previous industry reports that a reversal of ARP returns may require a change in the macroeconomic paradigm. This report offers some evidence that such a change may be underway. We see ARP as an integral part of an investor’s toolkit and remain committed to providing our clients with comprehensive, in-depth, and relevant analysis tailored to address their specific objectives.”
The MJ Hudson Alternative Risk Premia Report 2022 - Rebound on an empty court full report - Click here to download
The MJ Hudson Alternative Risk Premia Fund Review 2021 - Click here to download
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ABOUT MJ HUDSON
MJ Hudson (AIM:MJH) is the one-stop-shop solutions provider to the asset management industry, specialising in private markets and alternative investments. The firm helps fund managers and investors run more smoothly and perform at their best, through an integrated suite of advisory, outsourcing and analytical services, supported by a range of sophisticated digital tools.
MJ Hudson’s team of more than 300 lawyers, fund accountants, ESG consultants, developers and other professionals, serves more than 1,000 clients, across the globe, including some of the industry’s largest players.
Founded in 2010, by CEO Matthew Hudson (a private markets lawyer and former fund manager), MJ Hudson was admitted to the AIM market of the London Stock Exchange in 2019.
ABOUT MJ HUDSON’S ALTERNATIVE RISK PREMIA STRATEGIES ADVISORY TEAM
MJ Hudson’s Alternative Risk Premia advisory team is led by Antti Suhonen, who holds a position as Professor of Practice in Finance at Aalto University School of Business in Helsinki, Finland. His teaching and research interests include alternative investments, financial institutions, and fixed income and credit markets.
Antti previously held various derivatives structuring, product development, sales, and trading roles in investment banking over two decades. He was most recently Managing Director and global head of origination in the Equity and Funds Structured Markets business at Barclays Investment Bank in London, concentrating on alternative investments and quantitative investment strategies. Prior to Barclays, Antti worked at Bankers Trust in London and Union Bank of Finland (now Nordea Bank) in Helsinki and London. He holds an M.Sc. (Economics) and a Ph.D. (Finance) from Helsinki School of Economics and Business Administration.