Hedge Fund Data

Monthly hedge fund performance review – July 2022

18/08/2022
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Hedge fund performance was generally positive in July, albeit with some exceptions, with narrower dispersion than in June. Strategies with a higher beta to equities outperformed other strategies, after a material recovery in most equity markets in the second part of the month.

HEDGE FUNDS
Hedge fund compositeHedge fund strategies monitored by Aurum’s Hedge Fund Data Engine delivered generally positive returns in July, however this was not consistent across all strategies. The average hedge fund net return in July across all strategies was 1.26%. Performance dispersion was narrower than in June.
Long biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 5.75% in July. Despite the strong positive performance in July, it was not enough to recover from the substantial losses in June. All sub-strategies had positive returns. The best performing sub-strategy was long biased diversified growth, up 6.45%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned -1.11% on average in July. It was the weakest performing strategy in July, but remains the strongest performing strategy year to date, where it is up 9.35%. The worst performing sub-strategy was CTA with an average net return of -3.17%.
Equity long/shortEquity long/short funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 2.32% in July, in a month where global equities staged a material recovery. All sub-strategies were positive for the month, with the exception of Asia Pacific-focused funds, which underperformed amidst wider losses in Chinese equities.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 0.12%. Sub-strategies had mixed, but generally muted, returns. Macro emerging markets, which returned -0.24%, was the worst performing sub-strategy, continuing the weak performance seen year to date.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.30% in July. It is the second-strongest performing strategy group year to date. The smallest funds were the best performers, up 1.62%.

MARKETS
Major eventsMarkets were volatile and bifurcated in July. Inflation readings, and central bank responses to them were the key driver of market sentiment in the first half of the month. Less-hawkish-than-expected Fed interest rate decisions resulted in an uptick in sentiment and a considerable recovery in the latter part of July.
EquitiesAfter a challenging start to July, most equity indices across developed and emerging markets recovered significantly. Chinese equities were a notable exception; negatively impacted by further COVID-19-related lockdowns, missed mortgage payments by homebuyers in response to developers missing deadlines for delivery and reported fines on large Chinese conglomerates.
Government bondsGlobal government bond yields, which have been steadily increasing throughout 2022, lowered significantly in July. Early in the month, market expectations of a recession were, once again, illustrated by the US 2-year/10-year yield inverting early in the month. The ECB approved the Transmission Protection Instrument (a tool intended to stop disorderly movements in bond markets), which stimulated demand for Eurozone bonds.
Corporate bondsCorporate bonds performance was positive across all qualities in July. Lower-quality credit performed particularly well in the latter part of the month as risk-on sentiment returned to markets. All grades of credit quality continue to have losses year to date.
CurrenciesThe US dollar weakened in July after the Fed’s interest rate hikes were less aggressive than expected. The euro weakened; impacted by turbulence in Italy in the run up to upcoming elections, and in the face of Gazprom’s force majeure on gas supplies to Germany. The Russian ruble remained volatile, as gas supply to Europe was lower-than-expected after the annual maintenance of Nordstream1 was completed.
CommoditiesCommodity performance was largely negative in July. Natural gas was a notable exception, up over 50% on uncertainties about the delivery of Russian gas to Europe. Precious metals prices, particularly gold, were negatively correlated with the strength of the US dollar, so were weak until mid-month, then partially recovered. Russia and Ukraine reached an agreement to all exports of grain and other agricultural products in July, which resulted in prices of agricultural commodities falling.

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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