Deep Dive: Heightened market volatility presents opportunities for hedge funds

A new environment for the sector

The volatility that has rattled financial markets in the last year is providing opportunities for some hedge fund strategies, which may be experiencing a renaissance after more than a decade of lacklustre returns.

Hedge funds have been a major force across the industry since the 1990s, attracting millions from investors. However, in recent history, the sector has underperformed its benchmarks on an average basis.  "The low interest rate and low inflation environment we had experienced for the previous decade or so led to relatively low market volatility and therefore less opportunity for hedge fund traders," said Robin Willis, co-manager of the Premier Miton Defensive Growth fund. However, the tide appeared to turn in 2022, as some strategies achieved positive returns while the main stock and b...