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Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index declined -0.07% in February 2022, outperforming the S&P 500 by 4.38% over the month. Global equity market tumbled as Russia’s invasion of Ukraine, the most dangerous international conflict since the 1962 Cuban missile crisis has led to increasing concerns about stagflation at a time when global central banks are tightening monetary policy in a bid to cool inflation. In response to the invasion, the US and European countries imposed harsh economic sanctions on Russia, banning transactions with the Russian central bank and stopping it from deploying foreign reserves, essentially cutting Russia off from the global financial system. The RTS stock index and the Russian rouble plummeted -34.72% and -26.36% in February respectively as investors assessed the potential financial and economic impact on Russia. Stocks in the United States similarly fell as the S&P 500 and DJIA tumbled -4.05% and -3.53% in February respectively, extending their 2022 year-to-date losses to -9.09% and -6.73% respectively. Over in Europe, returns were negative among equity benchmarks in the region with the DAX and the Euro Stoxx 50 down -6.53% and -6.36% respectively. As Europe is highly reliant on Russian oil and gas supplies, European countries were disproportionately impacted by the sanctions imposed by Western nations on Russia which caused a spike in the price of commodities. The S&P Goldman Sachs Commodity Index surged 8.77% in February, while Brent crude and West Texas Intermediate Crude Oil were up 11.41% and 9.52% respectively.

Returns were negative across geographic mandates in February, with Latin American hedge funds the only exception with a positive return of 0.49% while the European and Asia ex-Japan mandates trailed behind with returns of -1.46% and -1.05% respectively. Across strategies, the CTA/managed futures and distressed debt mandates performed the best with returns of 21.78% and 0.73% respectively while the fixed income and multi-strategy mandates lagged their peers with returns of -1.44% and -0.72% respectively.

Roughly 45.3% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in February, and 87.8% of the hedge fund managers in the database were able to outperform the S&P 500 over the first two months of the year.

Figure 1: February 2022 and January 2022 returns across regions

Figure 2 illustrates the 2022 performance of hedge fund managers across regions. Most geographic mandate ended the first two months of the year in negative territory with Latin America the only exception. Asia ex-Japan hedge funds posted the largest losses of 4.16% - followed by European hedge funds losing 3.03% throughout the year as the ongoing war between the Ukraine and Russia contributed to the weakness of the region’s equity market. In the same vein, North American and Japanese hedge funds were down 2.51% and 1.72% respectively, while on the other hand Latin America were up 2.53%.

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