February 2023 | With Intelligence
It was a positive start for hedge funds in 2023, with industry AuM up $5.1bn in January, reversing December’s $7.8bn decline. This uptick was driven by impressive performance as net outflows were $3.3bn in January, which is encouraging after a challenging 2022 when industry AuM was down over $200bn – driven by $164bn of outflows.
Following flat performance in December (-0.6%), global hedge funds performed better in January despite the ongoing global economic turmoil, with the Eurekahedge Hedge Fund Index up 2.7%. By comparison, the S&P 500 was up 6.2% and the Dow Jones was up 2.8%, illustrating that hedge funds were wrongly positioned for a continued bear market at the start of 2023. Managers underestimated the improved equity market during January and the impact of slower central bank rate rises.
With global credit markets posting double digit drops last year, distressed debt hedge funds managed to stay positive with short positions, bespoke financing deals and some upward repricing of individual distressed bonds helping to counter higher inflation and growing recession fears. Average 2022 returns for our index of distressed debt hedge funds were 0.8%, putting it second behind CTAs and ahead of our general hedge fund credit index, while over three years the sector is well ahead of both credit hedge funds and the overall hedge fund universe.
