Hedge Fund Data

Hedge fund industry performance review – October 2023

22/11/2023
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Hedge fund performance was moderately negative in October; the average asset weighted hedge fund net return across all strategies was -0.34%. Most hedge fund strategy groups had negative average returns. Strategies with a lower beta to equities outperformed. October was the second worst month for equities year-to-date, amidst rising geopolitical tensions and strong US economic data, which resulted in US government yields continuing to rise. Hedge fund performance dispersion was slightly narrower than observed in September.

HEDGE FUNDS
Hedge fund compositeHedge fund performance was moderately negative in October; the average hedge fund net return across all strategies was -0.34%. The strongest performing strategy during the month was macro. Most underlying strategies had negative average net asset weighted returns; strategies exhibiting a higher beta to equities were the weakest performers. Hedge fund performance dispersion was slightly narrower than observed in September.
Long-biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of -2.34% in October, the weakest-performing strategy for a third consecutive month amidst broader market losses. Sub-strategy returns were all negative.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned 0.58% on average in October. Most sub-strategy returns were positive, with the exception of risk premia and CTA. Quant macro/GAA was the best-performing sub-strategy, up 1.75%.
Equity long/shortEquity long/short funds returned an average of -1.21% in October, amidst ongoing weakness in equity markets. Sub-strategy returns were nearly all negative, although there was some dispersion, from fundamental equity market neutral, +0.01% to sector long/short equity, down 2.34%.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 0.95% in October – the best performing strategy during the month. Sub-strategy returns varied, from macro commodities, down 0.88% to global macro, up 1.46%.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.45% in October. Larger funds (with an AUM of >$2bn) outperformed their smaller counterparts.

MARKETS
Major eventsMost asset classes experienced significant weakness in October, which was the second-worst month for global equities year-to-date. Market sentiment was impacted by heightened geopolitical instability and suggestions from the US Federal Reserve that monetary policy may tighten further.
EquitiesAll major equity indices lost ground in October. Emerging markets equities performed particularly poorly. For another month, Chinese equity weakness persisted amidst wider economic weakness and specific issues in the property sector. US equities performed better earlier in the month, but any gains were reversed as market concerns grew about further monetary policy tightening.
Government bondsMost major economies’ 10-year bond yields increased during October. The US 2/10y yield curve remains inverted, but the degree of inversion has continued to subside. European bond yields were the exception, and most fell somewhat following the ECB’s decision to hold rates, and the release of declining European inflation readings. The Bank of Japan made some minor amendments to its ultra-low rates yield curve control policy, but the changes were not significant.
Corporate bondsCredit indices across the quality spectrum lost ground in October in the broadly risk-off environment. Euro denominated financials and US dollar leveraged loans were the exceptions, making modest positive gains. US investment grade and sub-investment grade credit particularly underperformed.
CurrenciesThe US dollar strengthened against most major currencies in October, benefiting from equity market weakness, geopolitical concerns, and the possibility of a longer-than-expected period of elevated interest rates.
CommoditiesOil prices fell in October, as the US dollar strengthened. Natural gas prices rose as forecasts indicated colder weather expectations for winter in the US. Precious metals prices benefited from broader geopolitical uncertainty.

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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