HEDGE FUND DATA 19/11/2021

Monthly hedge fund performance review – October 2021

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Hedge fund performance was broadly positive in October, with slightly tighter dispersion than was observed in September. Strategies with higher beta to equities benefited from the strongest month so far this year for global equity markets. Macro was the exception to generally positive hedge fund performance, and was the only master strategy group with negative returns during the month. Positive corporate earnings in the US added to the economic recovery narrative, but the flattening of the US yield curve illustrated investors’ concerns about stagflation and sooner-than-expected rate hikes.

HEDGE FUNDS
Hedge fund compositeMost hedge fund strategies monitored by Aurum’s Hedge Fund Data Engine delivered positive returns in October. The average hedge fund return in October across all strategies was 1.04%, bringing year-to-date performance to 7.72%. Performance dispersion was slightly tighter than in September.
Long biasedLong Biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 1.63% in October, the second strongest performing master strategy during the month. All sub-strategies were positive for the month, led by Long Biased – Commodities, which was up 3.13%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine generated 1.11% in October, the second strongest month for the strategy year-to-date. All sub-strategies delivered positive returns, although CTAs had a particularly strong month, returning 2.53%.
Equity long/shortEquity Long/Short funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 2.41% in October, the strongest performing strategy in the month. All sub-strategies had positive performance, led by Global, Sector and US funds.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine had an average return in October of -2.09%, the weakest performing strategy in October and year to date, with a return of -0.58%. Sub-strategy returns were generally negative, with the exception of Commodities.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.16% in October. Most fund sizes delivered positive performance, however the $2 - $5bn bucket significantly underperformed other fund size groupings.
MARKETS
Major eventsAlthough soaring equity markets would have market watchers believe there is a rosy outlook for future global growth, fixed income markets painted a much darker picture. The flattening of the yield curve in the US and elsewhere, and rising bond yields reflected the deep concerns investors have about inflation, or even the prospect of stagflation. The peace process between North and South Korea made significant progress with a move to declare an end to the war on the Korean peninsula which has been ongoing since the 1950s. The COP26 summit in Glasgow started on 31st October.
EquitiesGlobal equity indices were mostly positive in October. In the US, strong corporate earnings pushed equity indices to new highs. Outside the US, the rebound in Chinese assets after the recent period of turbulence, and weakness in the US dollar were supportive. Chinese equities staged a significant bounce back after the impact of the slew of regulatory measures introduced in Q3. Japanese and Brazilian equities were an exception, and were in the red for the month.
Government bondsGovernment bond yields rose across the board in October. The US and some European yield curves flattened, reflecting concerns about long-term economic growth prospects and the potential for stagflation. The European Commission issued the world’s largest green bond during October; raising €12bn, the bond was 11x oversubscribed.
Corporate bondsCorporate bond performance was mixed but generally muted in October. US high yield, local currency emerging markets debt and hard currency emerging markets corporate debt were slightly negative. US investment grade and hard currency emerging markets government debt were slightly positive.
CurrenciesThe US dollar weakened against most major currencies during October, although this eased at month end as a slew of rate hikes in emerging markets were announced. The Reserve Bank of New Zealand (RBNZ) increased its cash rate by 0.25%, to 0.5%, the second major economy (after South Korea in August) to raise interest rates. Sterling made significant gains against the US dollar as expectations grew of a 2021 rate hike in the UK. The Russian ruble also made gains benefiting from the Central Bank of Russia’s rate hike and rising oil prices.
CommoditiesStrong demand combined with concerns about supply constraints were broadly supportive of commodity prices. Precious metals were supported by the slightly weaker US dollar. Base metals benefited from inflationary concerns, and supply concerns emanating from China’s energy crisis.

 

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