The Eurekahedge Hedge Fund Index was down 0.44%1 in September, outperforming the global equity market as represented by the MSCI ACWI (Local) which returned -3.55% over the same period. Global investor sentiment was negatively impacted as supply chain bottlenecks and the developing energy crisis in Europe and China led to a 11.60% surge in energy prices in September, the largest monthly price increase since February 2021. Oil witnessed similar large price increases in September, with Brent crude oil and West Texas Intermediate crude oil up 9.52% and 9.91% respectively as the OPEC+ decided to keep the supplies of oil tight despite the ongoing energy crisis. The Federal Reserve raised its inflation forecast for the year to 4.2%, up from the previous estimate of 3.4% and announced plans to begin tapering of quantitative easing in November 2021. Against this backdrop, the 10-year US Treasury gained 19bp, the most since March 2021. The heightened risk aversion led to sharp declines in major US equity indices, with the NASDAQ, S&P500 and DJIA down 5.31%, 4.76% and 4.29% respectively. Over in Europe, returns were negative among equity benchmarks in the region with the DAX, Euro Stoxx 50 and CAC 40 down 3.63%, 3.53% and 2.40% respectively. Market risk-on sentiment was dampened by the ongoing energy crisis and the political uncertainty post-Germany elections. Despite the challenges in Europe, the European Central Bank has projected real GDP to return to pre-crisis levels again by the end of 2021 and economic growth to remain strong in 2022. The pace of net asset purchases under the pandemic emergency purchase programme will also be calibrated at a moderately lower pace in the fourth quarter than in the previous two quarters. Returns were mostly negative across geographic mandates in September with Japanese hedge funds leading the group with a return of 2.62% while Latin American hedge funds trailed behind their regional peers with a return of -1.56%. Across strategies, distressed debt and event driven outperformed their strategic peers with returns of 0.92% and 0.62% respectively throughout the month.
Roughly 42.5% of the underlying constituents of the Eurekahedge Hedge Fund Index posted positive returns in September, and 32.0% of the hedge fund managers in the database were able to maintain a double digit return in 2021.
Figure 1: September 2021 and August 2021 returns across regions
Figure 2 illustrates the 2021 performance of hedge fund managers across regions. As of September year-to-date, most of the geographic mandates have recorded positive returns with Latin America the only exception.
Global hedge funds registered their best September year-to-date return since 2009 with a return of 8.14%, supported by the strong performance of the MSCI ACWI (Local) which has returned 12.07% over the same period. North American hedge funds outperformed their regional peers with a return of 11.46%, followed closely by Japanese hedge funds which returned 10.11%. At the other end of the spectrum, Latin American hedge funds lagged the group with a return of -0.28%.
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