Could 2025 be the year of the hedge fund (and TPP)? Here is why it might be.

Could 2025 be the year when Hedge Funds and platforms like TPP come into their own.

Equities don’t always go up and each year some stocks do well, some indices do well, but there are always winners and losers and the story is never as simple as it seems. US stocks tend to steal the headlines, and this year The Magnificent Seven performed, but for equity fund managers, investing is a lot more complicated than buying Meta or Nvidia and hoping for the best.

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We are also quick to forget just how bad it can get when American markets fall. We don’t have to look very far back to find evidence of one of the worst-performing years for tech stocks in history. In 2022, only 3 years ago, the Nasdaq fell over 32%. 2 years before that, most global markets hit lows of between 30% and 40%. Don’t get complacent, markets can be cruel.

However, 2024 was, on the whole, a good year for stocks. Not all stocks, but certainly the ones most retail investors have heard of – the Magnificent 7. Right now, they can do no wrong, but valuations on these are high, and at some point, there will always be a fall. Some will deny it until it happens, and some will talk about its imminent arrival until it happens, but one this is for sure, it will happen.

What do you do when markets are high? As a retail investor, your wealth manager has few options available to them and most of the time the answer is to sit tight and do nothing. Diversify with bonds and the widest range of equities possible and do nothing. Over a long enough time frame, this is sensible and generally proven advice.

However, there are other options available to you, buying in and sitting tight is no longer the only way to run a portfolio. Hedge funds offer structures and the means for institutions to diversify their risk by giving access to multi-strategy investments and traders using complex financial derivatives.

Now, there are also platforms like TPP whose traders use the very same strategies and make them available to individual investors like you. Their goal? To make you money no matter what the economic climate. There are no sure things in investing, but one thing is for sure, past performance, which is no guarantee of future returns, has been solid for a number of years now – even in 2022!

Investing isn’t easy and we always say that hindsight is and always will be the best trader. 2024 was no exception and with the benefit of hindsight, we can all say exactly where everyone’s money ‘should have been’. Looking back, many markets did well, but many did not.

It is important to remember that there is more to the global equity market than America. There are around 60 major stock markets in the world, and diversifying will always limit concentration risk.

Did you know that the Taiwan stock market was the best performer in Asia last year due to big gains from ‘Taiwan Semiconductor’ which represents a whopping 38% of the Index. If your money was in Taiwan, you could have made 28% by simply being in the index.

However, if you had put your money into the South Korean stock exchange, you would have lost over 8%. Bear in mind that in June 2023 Goldman Sachs argued that South Korea markets offered the highest potential earnings growth in 2024 in the Asia-Pacific region’ (CNBC). “We forecast EPS growth to rebound to 54% in 2024 and to grow 20% further in 2025,” Goldman said with regards to Korea’s Kospi benchmark index.

Big gains in Taiwan, big losses in South Korea, who knew? Certainly not Goldman Sachs.

In Europe it was a similar story. Your money would have done well if it was in the DAX, the main German index or the EX35, the Spanish benchmark, yet you would have lost over 10% had your capital was invested in Portugal or Luxembourg. The main Danish and Finish indices also both lost over 5% while Norway’s was up 10%.

Here are this years winners and losers.

As you can see, it wasn’t all plain sailing. The point is, investing in the stock market is not easy unless you have the benefit of hindsight. Saying where you money ‘should have been’ is not helpful and doesn’t help with the decision of where you money ‘should now be’ for 2025.

A majority of fund managers fail to even beat their own benchmarks, let alone the top performing benchmarks of that particular year.

This year was all about AI chatter. These two letters started popping up everywhere; in every press conference, earnings report and shareholder meeting, regardless of what sector they were in from retail to energy. If you didn’t say AI, your stock would be punished for it.

Add this to the fact that we live in a western world dominated by big US tech and it comes as no surprise that these companies performed well in 2024. However, don’t forget that they are the same companies which performed very badly in 2022 so do not think they will always be the answer.

Cathie Wood’s ARK Innovation Fund which performed so well in 2020, 2021 and then again in 2024, lost around 67% in 2022 and has a long way to go before getting back to previous highs. This is simply the nature of the market. Some things will go up, some things will go down, and it’s a fund manager's job to try and work out what will happen in the coming years. However, crystal balls are hard to come by.

Heavy concentration into any one geographical area or sector can cause big swings in a portfolio. Global funds diversify with global stocks. They might not be the best performing funds every year, but they should control volatility better than something like ARK which focuses on tech.

If the US market falls this year, then those who made gains in 2024 will be looking at painful losses. It might not, but the point is, nobody really knows.

Prior to 2022, Wall Street predicted a rally in the US stock market of around 8%. In fact, Wall Street has never predicted a down year in its history. Individual banks may have from year to year, but the consensus has always been for positive returns.

Here are a few comments taken from the 2022 estimates – a year when the S&P 500 fell 18.1% to 3,839.50 and was down even more (25.7%) at the end of Q3.

Goldman Sachs: 5,100

While markets will look very different than in 2021, Goldman still sees the S&P 500 rising slightly next year, predicting a nearly 10% gain from the index’s current levels.

JPMorgan: 5,050

Analysts at JPMorgan are also bullish on the stock market’s prospects next year, with the bank’s price target amounting to around an 8% gain from the S&P 500’s current price. Stocks should rise slightly in 2022 thanks to “robust” earnings growth as the labor market recovery continues, consumers remain flush with cash and supply chain issues abate, according to the firm.

UBS: 4,850

The market should be able to overcome concerns about the pandemic and high valuations, according to analysts at UBS, who see a nearly 5% gain for the S&P 500 next year.

BMO Capital Markets: 5,300

Analysts at the firm are among the most bullish on Wall Street, predicting the S&P 500 can reach 5,300 by the end of 2022—amounting to 15% upside from the index’s current price of 4,600. The bank believes that investors are too focused on inflation, which should moderate as supply chain kinks get straightened out next year.

Wells Fargo: 5,100-5,300

While pressures from higher inflation and supply shortages next year could hinder the economic recovery, there will still be above-average growth and gains for stocks in 2022

After two bullish years since, these terrible predictions are long forgotten. One year's devil is another year’s darling. As portfolio managers, our memories are longer than most and we do not forget how things chop and change and anyone who does will be punished for it, eventually.

Yes tech had a great year last year, but what if it falls this year? What is your investment strategy if the Nasdaq drops over 30% again?

So what can you do about it?

The job of our traders at TPP or those at global hedge funds, is to make returns when markets go up, but also to try and make returns (however small), when markets go down. Buying the Magnificent 7 would have worked well in 2024, but not in 2022. What if they now drop 10% over the course of 2025? Maybe the Tai exchange doesn’t fair so well but Denmark and South Korea do?

At TPP, we have built a platform with the sole aim of doing exactly this – building diversified investment portfolios centred around professional traders and trading strategies. Multiple strategies in multiple markets aiming to produce positive returns regardless of market climate.

Hedge Funds were designed for this very purpose. By using derivatives of asset classes rather than the underlying asset itself, it is possible to create investment strategies to trade both the upside and the downside. But even hedge funds get it wrong. In 2022, according to the ‘Barclay Hedge Fund Index’, the average return of hedge funds was negative by -8.22%. This may not have been a good year, but the Nasdaq was down -32% so losses were mitigated.

Often in years like 2020 and 2022, the best strategy is defensive. If you can lose less than everyone else, you have more money to put to work the following year. Nothing goes up every year and it’s important to factor that in. The perfect investment is no more common than a unicorn.

Even when the markets go down, most hedge funds will lose money as they nearly always maintain a long bias; after all, stocks tend to go up over time. This is why long-term investing is the only true way of predicting the market.

As you can see from The Barclays Hedge Fund Index, results tend to be more controlled with higher lows and lower highs meaning the equity swings are less, due to product/asset diversification, and the ability to hedge positions both short and long term.

From the Barclays database of over 2,000. Results accurate as of 16^th January 2025

These results give a much better indication of the global climate and how to manage a well-diversified portfolio. As you can see, there will still be poor performances, and the overall positive return is still way below any of the top-performing indices of the year.

Without the benefit of hindsight, hedge funds and TPP should be aiming for average returns of around, or just above, 10%.

As a retail investor, you don’t have access to hedge funds, but you do have access to TPP. It’s the new way to invest with professional traders working for you.

Here’s a quick look at our best performing trading strategies of 2024.

Past performance is no guarantee of future returns. Investments can go down as well as up.

Wall Street got it wrong last year but a number of TPP’s trading strategies did not. Economists' predictions were low due to high interest rates and geopolitical uncertainty. Those factors are still in play meaning this year’s predictions are once again, fairly modest.

Across the world, there will be winners and losers, nobody knows what will happen any more than they did last year but with many of our investment portfolios that doesn’t matter.

Some of TPP’s strategies are designed to track markets with heightened returns, some are designed to perform regardless of the market climate. In fact, some are designed to provide returns in markets that don’t rise, but merely oscillate, taking advantage of short-term volatility.

Build an absolute multi-strategy portfolio using our professional traders. For as little as £65 a month they will do the work so you don’t have to. TPP has delivered the future of investing and the only investment decision you have to make is whether you want to be a part of it.

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