Hedge Fund Data

Monthly hedge fund performance review – November 2022

19/12/2022
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Hedge fund performance was generally positive in November, although underlying strategies had mixed performance. Long biased was the top performing master strategy in November, although is still negative year-to-date. Quant was the worst performing strategy in November, although it remains the top performing strategy year-to-date. Strategies with a higher beta to equities typically outperformed other strategies, as equity markets continued to recover in November. The majority of global equity markets continue to have losses year-to-date. Government bond yields fell in most major markets; longer-dated bond yields fell more sharply. Hedge fund performance dispersion was slightly wider than observed in October.

HEDGE FUNDS
Hedge fund compositeHedge fund returns were generally positive in November. The average hedge fund net return across all strategies was 0.71%. Strategy performance was mixed, all but two of the strategies monitored by Aurum’s hedge fund data engine had positive returns. Strategies with a higher beta to equities outperformed. Hedge fund performance dispersion was slightly wider than in October.
Long-biasedLong biased funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 6.02% in November, the strongest performing strategy for a second month running. Despite this, it remains the weakest performing strategy year-to-date. Year-to-date long-biased sub-strategy performance ranges from long-biased commodities, +20.54%, to long-biased equity, -15.58%.
QuantQuant funds monitored by Aurum’s Hedge Fund Data Engine returned -3.51% on average in November. Despite this, quant remains the strongest performing strategy year-to-date, where it is up 8.01%. For a second month, quant macro was the weakest sub-strategy, down 8.39% for November and risk premia was the strongest sub-strategy, up 3.23% for the month.
Equity long/shortEquity long/short funds returned an average of 2.15% in November. Equity long/short is the second weakest master strategy monitored by Aurum’s Hedge Fund Data Engine year-to-date. Most sub-strategies had positive performance, with the exception fundamental equity market neutral, which struggled in the mid-month momentum reversal and subsequent deleveraging.
MacroMacro funds monitored by Aurum’s Hedge Fund Data Engine generated an average net return of 0.26% in November. Most sub-strategy returns were positive, except for global macro, which was impacted by the significant weakening in the US dollar, as many global macro funds had long-US dollar positions. Macro emerging markets was the strongest performing sub-strategy.
Multi-strategyMulti-strategy funds monitored by Aurum’s Hedge Fund Data Engine returned an average of 0.06% in November. It is the second-strongest performing strategy group year-to-date. Smaller funds, with an AUM of under $0.5bn, performed more strongly than larger counterparts.

MARKETS
Major eventsAfter lower-than-expected inflation readings in the US, Fed rate hike expectations were revised down, leading to a quite dramatic repositioning of markets. Anti-COVID lockdown protests gained momentum in China following the death of ten people in an apartment block fire in Urumqi, where rescue attempts were hampered by COVID lockdown polices. COP27 was held in November; one of the key outcomes was an agreement on a fund for climate justice finance in the developing world.
EquitiesGlobal equities continued to recover in November, boosted by the potential of slower than previously expected Fed rate hikes. Despite this, most equity markets remain firmly in the red year-to-date. Emerging market equities were the strongest performers, benefiting from more risk-on market sentiment. Despite volatility around the prospect of further lockdowns, Chinese equity markets rallied strongly.
Government bondsUS Treasury yields, particularly for longer-term bonds, fell in November in response to revised expectations about the pace of Fed rate hikes. The 2y/10y yield curve steepened, reflective of market expectations of an impending recession. UK and European bonds performed similarly to the US. Chinese short-term government bonds sold off as risk-on sentiment returned to equity markets.
Corporate bondsCorporate bond performance was positive in November. Despite positive performance in all major credit indices in November, all indices have negative performance year-to-date. Investment grade outperformed US high yield bonds. Emerging market corporate bonds were the best performers during the month.
CurrenciesThe US dollar significantly weakened in November, reflecting shifting market sentiment on the pace of future Fed rate hikes. The Japanese yen was the strongest performing major currency against the US dollar. Sterling strengthened against the US dollar after the Bank of England’s 75bp rate hike.
CommoditiesPrecious metals, particularly silver, benefitted from a weaker US dollar. Oil prices fell in response to OPEC revising down demand expectations. Russia and Ukraine extended the Black Sea grain export agreement, which assuaged concerns about wheat supplies from Ukraine and wheat prices fell.

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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