How different investment communities are planning to make returns during COVID-19
Throughout the coronavirus pandemic, we’ve seen huge short-term fluctuations in the stock market. For example, when Pfizer announced that trials of their coronavirus vaccine had been successful in 90% of cases, their stock price rose by 11 percent in a single day. However, although these short-term price movements are very useful for traders looking to make money from market volatility, they’re largely inconsequential to long-term investors. With this in mind, we’ve analysed how three different investing communities have approached the coronavirus pandemic and assessed what their long-term plans might be.
Hedge Fund Managers
Many hedge fund managers have viewed the pandemic negatively in terms of how it affects their investments. In fact, a recent whitepaper showed that 86% of surveyed hedge fund managers believe that the coronavirus pandemic has either been ‘very negative’ or ‘negative’ for the funds they manage. As a result, we’ve seen hedge fund managers exercise a great deal of caution throughout the pandemic. This is because so many have been uncertain about the operational, technological and regulatory trends that will affect future investments.
However, although coronavirus will affect hedge funds for the long term, trends are now emerging that will guide hedge fund managers and their investments. In the coming months and years, it appears as though hedge fund managers will target companies that focus on personal well-being and those who provide technology for daily operations. This is because companies in both sectors look set to be strong performers while the effects of the pandemic linger.
Private Equity Investors
Private equity investors have spent most of the pandemic stabilising their existing portfolios. In the next six months or so, many insurance companies and sovereign wealth funds will likely scale back their commitments to new funds, and many fundraising private equity funds will delay their fundraising plans.
However, although the number of investors looking to increase their private equity exposure will be reduced, the best funds will still retain the ability to raise money. It’s thought that P2P transactions and private company acquisitions will both be targeted due to pricing adjustments caused by COVID-19.
Real Estate Investors
The first UK-wide lockdown in March caused the property market to grind to a halt. However, in an attempt to kick-start the property market post-lockdown, the Chancellor announced a raft of new measures, including extensions to the Help to Buy scheme and a temporary end to Stamp Duty Land Tax. As a result, UK house price growth has hit a four-year high.
After remaining stagnant for much of the year, house prices have now begun to increase sharply in certain parts of the country. In the coming months, expect real estate investors to partake in what some industry experts are calling ‘the race for space’. This involves investors purchasing large houses in rural locations with outdoor space.
For many investors, this signifies a change in strategy when compared to the usual tactic of purchasing properties in central London locations. However, lockdown and the pandemic have changed priorities for many homeowners who have learnt lessons from their lockdown experiences. As a direct result, investors should look to suburban and rural locations for purchases to ensure they’re well-positioned to capitalise on a shift in buyer priorities. Demand looks set to hugely outstrip supply in these areas, making them solid investment choices for years to come.
In summary, although all three of these investment communities have handled the pandemic differently, it’s clear that all three groups are poised to break out of a holding pattern now the end of the pandemic is in sight. Although financial markets remain volatile, opportunities are now emerging for long-term investments and those who move quickest are likely to reap the greatest rewards.