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Hedge Fund Performance Commentary

The Eurekahedge Hedge Fund Index declined -0.72% in April, outperforming the S&P 500 which fell -8.80% over the same period. Global equities posted steep losses in April as the global economy was buffeted by unprecedented, simultaneous challenges, including the ongoing supply chain disruptions which were exacerbated by the widening COVID-19 lockdowns in China, the impact on prices and commodities from the escalating Russia-Ukraine war and a shift by global central banks towards a more hawkish monetary policy stance to fight inflation. Consumer prices in the United States jumped 8.3 per cent in April from a year ago, slowing slightly from the 8.5% year-over-year surge in March but remains among the fastest rate in decades. The unexpected persistence of high inflation has prompted the Federal Reserve to tighten monetary policy aggressively to try to cool price pressures, announcing earlier this month a 50bps interest rate hike, the biggest interest rate increase since 2000, with similar moves on the table in the coming months. Over in Europe, returns were mostly negative among equity benchmarks in the region with the Euro Stoxx 50 down -2.55% while the RTS Index gained 5.90%, supported by the strong recovery of the Russian rouble to a more than two-year high of 73.50 against the Euro after capital controls banning short selling and foreign players from selling shares in Russian companies without permission were implemented. Spurred by skyrocketing energy prices following Russia’s invasion of Ukraine, Eurozone inflation hit a record 7.5% in April, more than triple the European Central Bank’s 2% target seen as guaranteeing price stability. With a further acceleration in prices expected in the coming months, ECB president Christine Lagarde has signalled her support for an interest rate increase in July after the conclusion of the ECB’s stimulus programme early in the third quarter of 2022. Returns were negative across geographic mandates in April, with the European mandate performing the best with the smallest decline of -0.46% while the Latin American mandate trailed behind their peers with a return of -4.02%. Across strategies, the CTA/Managed Futures mandate performed the best with a return of 2.93% while the long/short equities mandate trailed behind their peers with a return of -2.29%.

Roughly 44.4% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in April, and 80.1% of the hedge fund managers in the database were able to outperform the S&P 500 over the first four months of the year.

Figure 1: April 2022 and March 2022 returns across regions

Figure 2 illustrates the 2022 performance of hedge fund managers across regions. As of April year-to-date, most of the geographic mandates have recorded negative returns with Latin America the only exception. Global hedge funds dipped further into the red with an April 2022 year-to-date return of -1.83% after the Federal Reserve’s aggressive moves to tighten monetary policy led to a broad decline in global equity markets. Despite recording the largest loss of -4.02% in April, Latin American hedge funds continue to remain the best performer among their regional peers with an April 2022 year-to-date return of 0.82%. At the other end of the spectrum, Asia ex-Japan hedge funds lagged the group with a return of -7.46% as the ongoing lockdowns in China continue to pose challenges for equities in the region.

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1Based on 51.89% of funds which have reported April 2022 returns as at 17 May 2022