Hedge Funds Suffer Worst Returns In 14 Years

Global hedge funds are set to register their worst returns in 14 years in 2022 after aggressive US interest rate rises hit asset prices hard, however, their declines are overall smaller than the slump seen in equity and bond markets this year, Reuters reported.

Photo Insert: Hedge fund returns have fallen 6.5% this year, their biggest since a 13% decline in 2008.

Some hedge fund strategies that put money in commodities and currencies using macro-focused strategies and exploited price differences between related securities outperformed in 2022, handing decent gains to investors.

"More than at any time in recent history, both equities and bonds have been very sensitive to macro events, particularly to inflation prints," said Meisan Lim, managing director of hedge fund research at Cambridge Associates.

According to investment data firm Preqin, hedge fund returns have fallen 6.5% this year, their biggest since a 13% decline in 2008. That compares with the MSCI World index's decline of 18.7% and the ICE BofA US Treasury index's decline of 11.9%.

Strategy-wise, macro funds gained 8.2% through November this year, while equity-hedged and event-driven strategies lost 9.7% and 4.7%, respectively, according to HFR data.

"As a strategy, macro has historically been less correlated to movements in the broader stock market, helping to diversify portfolios," said UBS in a note. "We think a continuation of tight monetary policy and high volatility should prove favorable for macro managers in 2023."

Activist funds, which use minority stakes to push for strategy and management changes to unlock shareholder value, slumped 13.8%, according to the HFR data.

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