Hedge funds largely protected investors from the equity market turmoil in September, with the Eurekahedge Hedge Fund Index declining 2.1% against a volatile market backdrop that saw the S&P 500 decline 9.3%. The Federal Reserve raised interest rates by 75bps to 3.25% in September and signaled their commitment to act aggressively to bring down inflation to the Fed’s 2% target — even if that leads to economic weakness. In the UK, the Bank of England intervened in Britain’s bond market after investors rebuffed the fiscal package of PM Liz Truss’s new government, sparking market turmoil that sent the sterling to an all-time low versus the US dollar.
September dispersion
Following the 2.1% decline in September, global hedge funds have extended their YTD losses to 5.9%. By comparison, the S&P 500 has lost 24.8% YTD, exemplifying the resilience that hedge funds have displayed in navigating the market turmoil in 2022. Returns were mostly negative across strategies in September, with only CTA/managed futures (1.5%) in positive territory to end the first three quarters of 2022 up 8.8%. Conversely, long/short equity funds recorded the lowest return of -3.2%, weighed down by the weak global equity market performance over the month. Returns were negative across regions in September, with North America (-3.0%) and Europe (-2.9%) performing the worst as the ongoing energy crisis, rising inflation and economic fears continued to damage sentiment. Asia (-2.8%) only fared slightly better as the region was hampered by China’s zero-Covid strategy and a deep slump in its property market.
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