Hedge Fund Data

Monthly hedge fund performance review – January 2022

21/02/2022
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Most hedge fund strategies finished 2021 with positive performance in December, with slightly tighter dispersion than was observed in November. Strategies with a higher beta to equities tended to perform strongly as global equities ended the year with a bang. Equity L/S funds were the exception to the generally positive picture, making modest losses. Investor sentiment was buoyed by strong earnings growth, and as fears were assuaged about the severity of the Omicron COVID-19 variant.

HEDGE FUNDS
Hedge fund compositeHedge fund strategies monitored by Aurum’s Hedge Fund Data Engine delivered mixed returns in January. The average hedge fund net return in January across all strategies was -1.52%. Performance dispersion was wider than in December.
Long biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -3.56% in January. Most sub-strategies were negative for the month. The worst performing sub-strategy was long biased – equities, which struggled in line with spiking volatility and a risk-off sentiment across most equity markets.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine generated 0.85% in January. Most sub-strategies were positive for the month, with the exception of quantitative equity market neutral and risk premia. The best performing sub-strategy was quant macro.
Equity long/shortEquity Long/Short funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -5.05% in January, the weakest performing strategy for the third consecutive month. Sub-strategies delivered mixed performance, the worst of which were sector, global and US long/short funds.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine had an average return in January of 1.02%, the strongest month of performance for the strategy since June 2020. Sub-strategy returns in January were generally positive; with the exception of macro emerging markets.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.99% in January. Larger funds outperformed their smaller peers; funds with AUM of <$1bn had negative returns on average. The largest funds ($5bn+) delivered the strongest performance.
MARKETS
Major eventsMarket sentiment in January was soured somewhat by the US Federal Reserve’s Federal Open Market Committee’s increasingly hawkish tone. The three rate hikes in 2022 that were projected at their meeting in December increased to four during January, along with a statement indicating that the asset purchase programme will come to an end in March. Tensions between Russia and Ukraine escalated during the month, with Russia amassing troops on the border.
EquitiesGlobal equity indices were almost all negative at the end of January. This was fuelled by a risk-off sentiment driven by an increasingly hawkish Fed in response to high inflation levels. The losses were larger in the US than in Europe. The factor rotation from growth to value hit US tech stocks particularly badly. The last week of the month saw a recovery in many markets, mitigating some of the losses in equities at mid-month.
Government bondsMost key government bonds of varying durations saw yields rise in January. 10-year German bund yields closed the month in positive territory for the first time since 2019. Greek bonds saw the largest increase in yields as the government faced a confidence vote which disconcerted bond investors.
Corporate bondsCorporate bond performance was generally negative in January, in line with the wider risk-off market sentiment. US investment grade corporate bonds were the worst performer for a second month. High yield bonds in both the US and Europe fared slightly better, though still ended the month in negative territory.
CurrenciesThe US dollar was supported by the US Federal Reserve’s Federal Open Market Committee’s announcements. Sterling fell against the US dollar but rose against the euro as expectations increased of a rate hike in the UK. The euro fell against the US dollar. The Japanese yen and Chinese yuan were almost flat against the US dollar. Political developments in Brazil contributed to the strengthening of the real. A rate hike in South Africa supported the rand.
CommoditiesCommodity prices were mixed in January. Oil and natural gas prices were supported by geopolitical tensions, primarily between Russia and Ukraine. The US dollar’s strength caused precious metal prices to lose any gains made earlier in the month. Supply concerns supported some agricultural commodities.

The Hedge Fund Data Engine is a proprietary database maintained by Aurum Research Limited (“ARL”).  For information on index methodology, weighting and composition please refer to https://www.aurum.com/aurum-strategy-engine/. For definitions on how the Strategies and Sub-Strategies are defined please refer to https://www.aurum.com/hedge-fund-strategy-definitions/

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