Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index was declined 1.14%1 in November, outperforming the global equity market as represented by the MSCI ACWI (Local) which returned -2.03% over the same period. Growing market fears over the emergence and spread of a new Omicron variant of COVID-19 blunted risk sentiment as early indications suggest that Omicron may be markedly more contagious than previous variants. Several recently published studies have found that existing vaccines are less effective against Omicron, potentially derailing the global economic recovery if governments are forced to reimpose movement restrictions to stem the spread of the virus. Compounding matters further, Federal Reserve Chairman Jerome Powell indicated that a swifter tapering of asset purchases was under consideration and that inflation should no longer be described as transitory. The resulting uncertainty led to a surge in market volatility, as seen in the 67.22% increase in the CBOE VIX and negatively impacted the performance of global equities. The DJIA and S&P500 posted declines of -3.73% and -0.83% in November respectively, bringing their year-to-date return down to 12.67% and 21.59% respectively. Over in Europe, returns were negative among equity benchmarks in the region with the Euro Stoxx 50 and DAX down -4.41% and -3.75% respectively. The emergence of the new Omicron coronavirus has already forced some European countries to reintroduce restrictions on activity, most notably in England where Prime Minister Boris Johnson has announced a move to Plan B to protect the NHS from unsustainable pressure and buy time to deliver more booster shots. Returns were negative across geographic mandates in November, with Asia ex-Japan hedge funds leading the group with a return of -0.19% while Japanese hedge funds trailed behind their regional peers with a return of -1.69%. Across strategies, arbitrage hedge funds outperformed their strategic peers with a return of 0.25% in November while CTA/Managed Futures hedge funds were the worst performer with a return of -2.20%.

Roughly 34.7% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in November, and 32.6% of the hedge fund managers in the database were able to maintain a double digit return in 2021.

Figure 1: November 2021 and October 2021 returns across regions

Figure 2 illustrates the 2021 performance of hedge fund managers across regions. As of November year-to-date, most of the geographic mandates have recorded positive returns with Latin America the only exception. Global hedge funds generated a November 2021 year-to-date return of 8.36%, down from the 9.60% October 2021 year-to-date return after the emergence of the Omicron variant of COVID-19 in late November dampened risk sentiment, resulting in a broad decline in global equity markets. North American hedge funds outperformed their regional peers with a return of 12.66%, followed by European hedge funds which returned 6.81%. At the other end of the spectrum, Latin American hedge funds lagged the group with a return of -4.66%.

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1Based on 63.10% of funds which have reported November 2021 returns as at 16 December 2021