The Eurekahedge Hedge Fund Index gained 0.04% in August, a second consecutive month of positive returns following a 1.5% gain in July, even as the broader markets continued to plummet, as reflected in the 4.2% decline of the S&P 500. Hopes for a dovish pivot in monetary policy in early 2023 were dashed after Federal Reserve chair Jerome Powell reiterated the need to maintain tight monetary policy and avoid loosening policy too early as inflation remained stubbornly high at 8.3% in August. This raises expectations for a substantial rate increase of 75 bps at the Fed’s upcoming meeting on September 21.
Following back-to-back monthly gains, global hedge funds have pared losses to 4.1% YTD. By comparison, the S&P 500 is down 17.0%, exemplifying the resilience that hedge funds have displayed in navigating the market turmoil in 2022. Returns were mostly positive across strategies in August, apart from long/short equity (-0.5%) and event-driven (-0.1%). Returns were mixed across regions in August, with Europe (-0.8%) the worst-performing region as the energy crisis intensified after Russia curtailed gas supply, causing a spike in prices that is eroding real incomes and increasing the likelihood of an outright recession later this year. In contrast, Asia (0.5%) was the best-performing region, supported by the People’s Bank of China’s move to cut several key reference rates in August to help revive an economy that has struggled with a slowdown in the housing market and the zero-Covid strategy.
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