Hedge fund to make $6 billion in first quarter, $9.4 billion in second quarter
Hedge funds, including those of the hedge fund giants BNP Paribas and BlackRock, are poised to make billions in profit after a surge in interest rates caused them to seek investors.
A key reason is the prospect of lower interest rates that could make it cheaper to borrow money and pay for investments.
BNP and Blackrock, which have both benefited from a weakening dollar, reported first-quarter earnings Thursday, beating Wall Street estimates.
The funds, whose annual revenues reached $1.2 trillion, also reported quarterly net income of $3.3 billion.
“Investors are more confident in hedge funds, particularly with the U.S. Federal Reserve lowering rates,” Blackrock Chief Executive Officer Jon Brodkin said in a statement.
Hedge fund managers and hedge fund investors have been in a frenzy to buy into the markets and the S&P 500 index after the Federal Reserve raised interest rates to a record low.
The index has been on a tear and the yield on the benchmark is now below 1.0%.
“Investments in hedge fund funds are expected to continue to increase in the coming months,” a S&P 500 analyst wrote in a note to investors.
Hedge funds have a huge portfolio of money and have a wide variety of strategies.
They invest in many different types of securities including bonds, mutual funds and commodities, among other things.
Blackrock also has invested in a wide range of other stocks including Apple, Facebook, Amazon, Coca-Cola and Nike.
It said it expects to record $7 billion in net income in the first quarter of 2019.
The hedge fund sector has also seen interest rates on the Federal Funds, a private bank-backed savings fund, rise.
Interest rates are set by the Fed, which keeps rates at a record level.
The Federal Funds are backed by $1 trillion of reserves from the Federal Deposit Insurance Corporation, the nation’s largest bank.
BlackRock said its fund will invest $3 billion of its own money.