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Sunday, February 5, 2023

Wall Street big funds posted their worst performance since 2018

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Equity funds posted the worst performance in 2022 among the four main categories of hedge funds tracked by the HFR. Even so, its 10.37% loss managed to outpace that of the S&P 500, which fell 19.4% in its worst year since 2008.

Event-driven hedge funds, including those that bet on company mergers or restructuring, and relative value funds, which trade on asset price dislocations, also ended the year with losses of 5.04% and 0. 9%, respectively.

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Cryptocurrency hedge funds plunged 55.08%, after posting positive returns in just three months of the year. Despite their massive losses, cryptocurrency hedge funds account for a tiny fraction of the industry’s $3.8 trillion in assets.

BULL (BULL MARKET) VS. Bear (bear market). Who will win the short term and long term arm wrestling?

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BULL (BULL MARKET) VS. Bear (bear market). Who will win the short term and long term arm wrestling?

While equity and cryptocurrency portfolio managers struggled last year, hedge fund investors found silver linings for returns. Macro hedge funds outperformed the sector, the HFR showed. The HFRI Macro Index rose 9.31%, driven mainly by commodity, quantitative and trend-following strategies, the data provider said.

“Investors have to look below the surface to understand the sector’s performance last year. ‘Long-short’ hedge funds (taking long or short positions on different stocks as a compensating strategy) are the largest asset-weighted sector in the industry.”said Patrick Ghali, managing partner at hedge fund advisory firm Sussex Partners. “Overall, I think it was a good year for hedge funds.”

Macro funds trade a wide range of assets globally, including bonds, currencies, rates, stocks, and commodities. This allowed them to place their bets wisely on asset price dispersion caused by rising interest rates and rising inflation.

Reuters reported earlier this year that Investors view macro hedge funds as likely to outperform the sector again this year as the volatile environment for markets persists.

Last year’s turmoil was also positive for multi-strategy hedge funds, which can trade different assets and markets. Kenneth Griffin’s Citadel posted gains of 38.1% in its flagship Wellington fund, while DE Shaw’s Composite Fund rose 24.7% and Millennium 12.4%.

Source: Ambito

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