Following an outstanding January (2.8%), which was the best opening to a year since 2006 according to the Eurekahedge Hedge Fund Index, global hedge funds struggled in February, ending down 0.5%. However, the S&P 500 was down 2.6% and the Dow Jones was down 4.2% in February, illustrating that hedge funds were still successful in navigating the ongoing global economic turmoil. Returns were subdued across strategies in February with distressed debt (0.8%) leading the field. The volatile global economic environment has provided strong tailwinds for distressed debt funds in 2023, with the strategy up 4.3% YTD. In a reversal from January’s stellar returns (4%), long/short equity funds’ weak performance (-1.1%), driven by an Asian downtick (-2.3%), echoed 2022’s struggles in global equity markets
Following a positive January (1.6%), macro managers struggled in February (-0.6%) to adjust to the uncertainties of repeated central bank rate rises, the commodity price fluctuations caused by the Ukraine war and the increasingly acrimonious US-China bilateral relationship. Fixed income funds reversed their four-month positive record and were down 0.2% in February, with Asia-focused funds (-2%) again driving the downturn. After a poor 2022 (-7.3%), relative value funds continued their strong 2023 performance, returning 0.4% in February and 2.6% YTD. Convertible bond strategies are increasingly attractive by recent standards and relative value is also benefiting from wider credit spreads and higher volatility. Regionally, only Europe saw positive returns (0.6%) across all strategies in February with Asia (-2%) struggling to maintain the momentum of China’s economic reopening after the end of zero-Covid and ongoing real estate turmoil.
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