While hedge funds largely rejected the age-old adage “don’t fight the Federal Reserve” in the second quarter, there have been a number of notable exceptions.
Soros Fund Management, the household workplace of billionaire investor George Soros, boosted its holdings of BlackRock Inc.’s iShares iBoxx $ Investment Grade Corporate Bond exchange-traded fund, ticker LQD, by $161 million in the interval, regulatory filings as of June 30 present.
That was the greatest guess amongst $534 million of fast-money inflows, with Moore Capital’s $109 million funding rating second.
Still, the majority of fund managers pulled cash from LQD even after the Fed introduced in late March that it could buy company bonds and eligible ETFs. Trading successfully froze throughout bond markets throughout the peak of March’s coronavirus-fueled turmoil, however the Fed’s backstop sparked a torrid rally that despatched billions into company bond ETFs.
Despite the surge, hedge funds yanked $1.87 billion from LQD — the largest credit score ETF — with Elliott Investment Management’s $468 million exit and Ken Griffin’s Citadel’s $341 million discount main the outflows.
For Soros and different funds that piled in, the funding has paid off: LQD has climbed practically 20% since the Fed introduced its assist on March 23. The central financial institution has bought $8.7 billion price of ETFs by way of July 31 after beginning the facility in mid-May, in accordance its newest disclosures, and is now the second-largest holder in the $56 billion LQD.
“The purchases are due to the fact that it is the corporate bond ETF the Fed is buying most aggressively,” mentioned Michael O’Rourke, chief market strategist at JonesTrading. “This is a market largely driven by liquidity and flows, as opposed to fundamentals.”