HEDGE FUND DATA 17/12/2021

Monthly hedge fund performance review – November 2021

Most hedge fund strategies delivered negative performance in November, with slightly broader dispersion than was observed in October. Strategies with higher beta to equities were some of the worst hit in the second weakest month of the year so far for global equity markets. Arbitrage and multi-strategy were the exception to generally weak hedge fund performance, and were the only master strategy groups with positive returns during the month. Investor sentiment weakened with the emergence of the Omicron variant of Coronavirus.

Hedge fund compositeMost hedge fund strategies monitored by Aurum’s Hedge Fund Data Engine delivered negative returns in November. The average hedge fund return in November across all strategies was -1.18%, bringing year-to-date performance to 6.34%. Performance dispersion was slightly wider than in October.
Long biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -1.31% in November. Most sub-strategies were negative for the month; the worst performing of which was long biased – equity, down -2.63%. Long biased – commodities also performed poorly, amidst falling energy prices, notably oil which saw the worst one-month-performance since March 2020.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine generated -1.11% in November. Sub-strategies delivered varying returns. CTAs had a particularly weak month, returning -2.90%. Statistical arbitrage, risk premia and quantitative equity market neutral delivered positive returns.
Equity long/shortEquity Long/Short funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -3.09% in November, the weakest performing strategy in the month. All sub-strategies had negative performance, the worst of which were in sector, US and global sub-strategy funds.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine had an average return in November of -0.98%. It remains the weakest performing master strategy group year to date, with a return of -1.01%; the only master strategy with negative year-to-date returns. Sub-strategy returns were generally negative; macro emerging markets was the weakest performing.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.47% in November. All fund sizes actually delivered negative performance, with the exception of the largest funds (>$5bn+), which made the overall asset weighted performance positive.
Major eventsCOP26 concluded in November. Whilst an agreement was reached, the interventions of China and India watered down commitments on reducing the use of coal-fired power stations. The October US CPI inflation rate printed at 6.2%, a 30-year high. This may have been the trigger for Jerome Powell, US Federal Reserve Chairman’s pivot towards more aggressive tapering, sooner. When combined with the emergence of the Omicron variant towards the end of the month, markets responded by moving to more risk-off positioning; equities indices and commodities fell, and government bond yields also fell.
EquitiesGlobal equity indices were negative across the board by the end of November, falling at the end of the month as the economic recovery narrative gave way to concerns about inflation and the Omicron variant. Europe and emerging markets performed worse than US markets. Chinese equities fell particularly sharply as concerns about regulatory change and Evergrande’s debt crisis weighed on investors.
Government bondsMost government bond yields fell in November reflecting the “flight to safety”. The largest reduction on yields was seen in core European bonds and UK gilts. Additional COVID-related restrictions introduced in Europe resulted in falls in yields as investors sought out safe haven assets. US yield curves flattened, and demand was poor at an auction of 20-year US Treasuries.
Corporate bondsCorporate bond performance was generally negative in November. US-denominated emerging markets debt and the lower quality US high yield were the weakest performers. Losses were more muted in US leveraged loans and all European credit. US investment grade corporate bonds were slightly positive.
CurrenciesThe US dollar strengthened against most major currencies during November. It was initially supported by the economic recovery narrative, then by the increased likelihood of sooner-than-expected rate hikes, and finally by its “safe haven” status with the emergence of the omicron variant. As South Africa was added to the “red list” of many countries’ travel restrictions, the rand plummeted. The Russian ruble fell as a result of falling oil prices, and from the diplomatic fallout from Russian-sponsored unrest on the Ukrainian and Polish borders.
CommoditiesSharp falls in energy prices pulled down the performance of commodity indices. WTI crude oil prices had the biggest single month fall since March 2020, with worries of an economic downturn due to the Omicron variant and the announcement of the release of US strategic oil reserves. Gold prices experienced intra-month volatility, supported by concerns about inflation, but then falling after the Fed’s pivot to a more hawkish tone about tapering.


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