Monday, May 27, 2024

Equity hedge funds drive industry up in November

Hedge funds enjoyed one of their best months of the year in November, as long/short and event-driven funds advanced in a positive market setting.

Hedge Fund Research’s fund weighted composite rose 1%, reducing year-to-date losses to 4.1% with a month of 2022 remaining.

Long/short equity returns were largely positive (averaging 2.7% according to HFR) amid another good month for stock markets. The S&P 500 rose 5.4%, its first back-to-back gain since 2021.

But funds were caught out at the start of the month by better-than-expected inflation data, which rallied the market. Bearish funds “were forced to pivot quickly, covering shorts and adding longs in previously unfavourable areas of the market (e.g. technology and consumer-discretionary stocks),” reported Man Group.

“As a result, upside capture has been more limited and there has been extreme dispersion in equity long/short performance this month.”

Long/short credit funds also gained, while “a meaningful rally in Treasuries helped the investment-grade market outperform US high yield and leveraged loans.”

Event-driven was up 0.8% in a positive month for deal-making, though the unexpected collapse of the Rogers/DuPont deal brought some losses.

It was less positive for macro, down 2.7% in November, though it remains the top performing broad hedge fund strategy so far this year, up 8.2%.

“The softer-than-expected CPI print in the US caused some pain in long US dollar positions as investors priced in a more dovish outlook for the Fed,” said Man Group.

CTA strategies had a second month of notable declines in November but remain on track for a historic year of gains.

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